All Forum Posts by: David Espana

@Justin R., @Rob K., @Robert Rayford & @Jo-Ann Lapin, thank you all for your advice. I am glad that I went through Biggerpockets to get advise before going forward with private lending. I would like to see this investor first sell one (or even better two or more) of his properties at a good profit before making a decision to do any private lending to him. 

For this particular property, the LTV on this investment is approximately 80% (that is too risky for a second or third position lender). The $150K rehab estimate I did think was a little light. $210K to $240K does make more sense. I revised my analysis using $240K rehab cost, imputed about 10% for contingencies and imputed other expenses (interest expense, property taxes, utilities and other misc expenses) and with say $950,000 ARV, I show break even. So if anything were to go wrong, then that would not be a good thing!

Thank you @David Benton, @Dmitriy Fomichenko, @Casey Mericle & @George Blower for your input. I was not aware of the equal dignity note. That is a great idea and I will definitely request it. 

The property is in a desirable location (located about three blocks north of Balboa Park in San Diego). It is currently improved by a 700 SF single family dwelling with historic designation. The investor got all the permits and got approval for the historic part. The plan is to almost double the SF of the existing dwelling and add a 700 SF detached guest house (which the zoning allows). The overall total will be a little more than 1,800 SF. Construction has commenced. 

The property was purchased for $560,000 and $150,000 in construction/rehab is planned. The ARV is around $1,000,000. The investor took out a $570,000 HML (at 10.5% I believe). A private money lender loaned $200,000 for the second position (not sure what rate). The two Deeds of Trust were recorded. the investor is requesting $40,000 additional loan at 10%. The additional funding is to help pay interest on the first loan (plus other expenses). I did my own analysis (I am a real estate appraiser), included additional contingencies and other expenses and the investor should clear $100K or more if all goes as planned.

The investor currently has four projects ongoing (including this property). One is complete and on the market for sale. Two others are near completion. This is the investor has over a year experience in the San Diego market. 

I have set up a self-directed IRA account for my real estate investments. I have been approached by an investor/developer to lend second or third position on his projects (which is allowed by my SDIRA custodian as long as there is a Promissory Note and Deed of Trust). He offers 10% interest on private money with the loan & interest being payable in one lump sum upon the sale of the rehabbed property. My thinking is that 10% is a little low due to second or third position loans being riskier than first position loans. I believe that 12% or higher is more realistic for second or third positions. Any thoughts on what is a realistic rate range for these loan positions would be greatly appreciated. Also any general advise on this topic (private lending) is also welcome.

@Parker Cox Yes, my brother is really happy with the purchase and the quality of renovation. He paid $469,000 back in June so it has already appreciated. I did let him know about this meeting and he is interested in attending. He would like to learn about the details going into this rehab since it was the same rehab done to his house. 

@Dan H.. Thank you for sharing your experience and your recommendation. The leak was through the asphalt shingles and, as mentioned above, my handyman and I did an emergency patchwork until we can get the roof looked at by a roofing specialist. The tile looks like it has seen its days (it's about 20 years old I believe). This quick repair has bought me time (I hope) to make decisions on solutions for roof. 

@Justin R. Thank you for the lead on the two brothers. I will certainly contact them. Emergency patchwork needed to be done before this big storm arrived so this morning I was able to get my handyman and we applied roof patch on some tiles that were definitely compromised. Hopefully this will stop the leak. If it does, it will give me time to make decisions on permanent solutions for the roof.  

Hi, I am looking for recommendations for roofing contractor here in San Diego. One of my rental properties has a roof leak (caused by the recent storms here). It may require a temporary fix for now until the storms pass. I welcome your thoughts and recommendations. Thank you. 

How interesting!! A few months ago, my brother purchased one of Dave's four flipped homes on this cul du sac (his house is about a couple of houses down from the meet-up address). The rehab cost was about the same I think ($45,000 to $50,000). It's the same model but the floor plan is reversed. Great job on the rehab!