| Basic Example usually consists of: | | | | balance of $2,975,000 to be financed. The invester |
| Purchase Price | | | | must put $1,700,000 of his own cash or equity into the |
| Appraised values before and after project values | | | | purchase (20% minimum borrower investment). The |
| (before work done & after work done) or Quick Sale | | | | remaining 15% balance is $1,275,000, which can be |
| value | | | | financed with a seller carry back . |
| Down Payment (skin in the game) | | | | In order to help this investor qualify for a new hard |
| Loan Costs | | | | money loan, the funding source can use a blanket loan. |
| Seller Carry back 2nd | | | | A blanket loan is a single loan over the property to be |
| All of these mean you will need Equity in the property | | | | purchased, and over a second property already |
| to get the loan done. | | | | owned by the investor, to come up with the 20% |
| Will the seller need a seller carry in this example if the | | | | minimum investment required of the borrower. |
| lender loans 65% of after or appriased value: | | | | The second property, which the investor already owns, |
| Purchase Price 600,000 | | | | is another apartment building he purchased seven |
| Appraised or Quicksale value 1,000,000 ltv of 60% | | | | years ago. Today, the quick sale value of this property |
| 10% Down Payment 60,000 | | | | is $3,500,000, with a balance of $575,000 owed on it. |
| Loan Amount of 540,000 | | | | The funding source can blanket a single loan over the |
| On this deal the answer would be no. Because the | | | | apartment house to be purchased, and over the |
| hard money source is willing to pay up to 65% of after | | | | apartment house already owned by the investor. |
| or appraised value. These loans are always the best | | | | 65% of the $3,500,000 quick sale price is $2,275,000, |
| but they are very rare. Most hard money sources will | | | | minus $575,000 to pay off the existing loan on the |
| go off the contract price for value and not appraised | | | | second property. This leaves the investor with |
| value. Some, there are others out there that still work | | | | $1,700,000, which can be used for his 20% minimum |
| like this. | | | | investment in the purchase of the new property. |
| Here is how it would look off sales price and with a | | | | 1. Apartment building to be purchased by the investor. |
| seller carry instead: | | | | $ 8,500,000 quick sale price |
| 600,000 Purchase Price | | | | - 5,525,000 hard money loan (65% of appraised value) |
| 600,000 Sales price or contract value | | | | 2,975,000 balance |
| 60,000 Seller carry | | | | 2,975,000 balance |
| 150,000 Down payment of 25% | | | | - 1,700,000 borrower cash or equity (20% borrower |
| 390,000 Loan amount at 65% | | | | investment ) |
| This is how you would set up the loan if you are | | | | - 1,275,000 15% seller carry back or other subordinated |
| getting 65% of purchase price. So as you can see | | | | 2nd mortgage |
| there is never one way to set up one of these deals. | | | | $ 0,000,000 |
| In this example: | | | | 2. Apartment building already owned by the investor. |
| A purchase of an office building for $5,000,000. The | | | | $ 3,500,000 quick sale price |
| firm needs a new hard money loan for $3,250,000, | | | | - 2,275,000 hard money loan (65% of appraised value) |
| which is 65% of the property's quick sale value. This | | | | - 575,000 to pay off balance owed on property |
| leaves a balance of $1,750,000 to be financed. The | | | | $ 1,700,000 to be used for 20% borrower investment |
| firm must put $1,000,000 of its own cash or equity into | | | | in new property |
| the purchase (20% minimum borrower investment). | | | | 3. Blanket loan over both properties |
| The remaining 15% balance is $750,000, which can be | | | | $ 12,000,000 combined quick sale price of the two |
| financed with a seller carry back or other subordinated | | | | properties |
| 2nd mortgage. | | | | $ 7,800,000 new hard money loan (blanket loan |
| $ 5,000,000 quick sale price | | | | (65% of combined quick sale price) |
| - 3,250,000 hard money loan (65% of appraised value) | | | | - 575,000 to pay off loan on old property |
| 1,750,000 balance | | | | - 5,525,000 hard money for new property to be |
| 1,750,000 balance | | | | purchased |
| - 1,000,000 borrower cash or equity (20% borrower | | | | - 1,700,000 20% borrower investment in the purchase |
| investment) | | | | of new property |
| - 750,000 15% seller carry back or other subordinated | | | | $ 0,000,000 |
| 2nd mortgage | | | | If you need some help with the deal you are setting up |
| $ 0,000,000 | | | | please post or email it to me and i will gladly help you |
| Next Example: | | | | with it.thanks every one for visiting my blog and i hope |
| A purchase of an apartment building for $8,500,000. He | | | | you have a good chistmas 2009 and new year for |
| needs a new hard money loan for $5,525,000, which is | | | | 2010! |
| 65% of the property's quick sale value. This leaves a | | | | |