Need help analyzing note

[Jeff Caravalho]

Hello BP, I'm looking at doing some note investing with a local REI group broker I've been networking with. I'm a complete newbie on notes and would appreciate some advice on this. Is this a good investment for a new note investor.

It is for a buy, remodel and hold property. The rehab will be completed in 4 months time (conservatively) to be ready for Spring renters.

Their plan is to do a cash-out refi out in 12 months after the rental is seasoned (the loan is for 15 months to allow time for the loan to go through). Their first 1st refi option is a traditional lender, 2nd refi option is with an asset based lender like LendingHome.

Loan Requested:

• $61,000 for Purchase only
• 1st Position
• Interest: 9%
• Monthly Payments: $497.47
• LTV: 43% (Loan to Purchase Price)
• ARV: 24% (Loan to After Repair Value)
• Loan length 15 Months
• Total Interest Paid 1 Year: $7,462.01

• Purchase price: $141,000
• ARV: $250,000
• Down Payment: $77,537
• Rehab: $40,000 from borrower's reserves
• Total Project Cost: $181,000
• Buyer's Cost to ARV: 72%

Concern:  Property is not in a great area (lower income community)

Questions:

1.  Is interest rate 9% because broker is taking 3% commision (I'm thinking they are feeling me out here because I'm new to them).

2. LTV seems low. Is a lower LTV better for the lender or not?

Thanks for the help!