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Updated about 18 years ago on .

Account Closed
  • Developer
  • fairfield, CT
2
Votes |
18
Posts

2nd mortgage opportunities on rehabs

Account Closed
  • Developer
  • fairfield, CT
Posted

We are seeking investors interested in a secured note on our rehab projects. This "gap" financing is a second to a hard money 1st and never exceeds 90% LTV (after rehab value). We are paying 20% annual interest.
We are very experienced contractors and an MBA and credit scores are in upper 700's. We operate only in our market area of CT with income producing multifamilies. All mortgages are prepared by your local attorney which we pay for.
An example of the way it works is our hard money lender has the after repair value of our project appraised (say 300k). We buy for 150k and it needs 75k of rehab. The hard money lender will lend 75% of ARV or 225k but requires interest reserve of 25k (6 months). Our working capital amounts to another 25k so we have a cash flow deficeit of about 50k on each project.
We look for a second mortgage in the amount of 15% of the ARV or, in this case, 45k with 6 months interest deducted. We complete each project in about 60 days and refinance to take out both loans. (Also, the property is usually worth 10% more than when first appraised.)
Any interest, please reply.
Thank you.