PRIVATE
HARD-TO-DO-LOANS AT RATES FROM
12-20%* & 3-10
PTS
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*Interest
rates can exceed 20%. Rates are based on many deciding
factors.
**In many cases.
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With investors located around the world, we
review and consider projects on a Global
basis. However, our
first priority is within the United States and its territories.
The Equity Experts, a special finance consultancy
is dedicated to helping
individuals, entrepreneurs and corporations
to fund those Hard-To-Do-Loans.
With direct private money available
for projects ranging from $50,000 up,
we will work with you
to get your deals funded.
What kind of projects do we like?
WHAT FUNDING PROGRAMS DO WE OFFER?
Unlike traditional lending, private
mortgage/trust deed lending (also known as private equity,
or “hard money” lending)
is the process by which a private investor lends money against
a piece of property and holds a mortgage or deed of trust lien
against that property, much like a bank or mortgage lender.
In most cases, Borrower’s treat
the transaction just exactly like that of a bank loan or
conventional mortgage,
but with a certain ease that is just not available through
traditional lending sources.
OPTION #1: PRIVATE MORTGAGE/DEED
OF TRUST LOAN
Borrower Pros:
• Credit ratings are often insignificant in lieu of strong real
estate assets and a qualified borrower (based on assets, experience
and historical performance).
• Funding can occur in days rather than months
• Interest only payments can be negotiated with some payments
deferred to loan payoff
• Joint venture and/or straight loan programs can be negotiated
• Loans can be as short as 3 months and as long as 5 years (sometimes
longer)
•
Borrower’s enjoy the personal and consistent service
of a professional loan management team rather than the cold
distance of a payment coupon book.
Borrower Cons:
• Typical loans have larger transaction fees, higher interest
rates and tougher default terms
• Borrower can default resulting in foreclosure of property more
quickly
• Late fees, default fees and foreclosure fees are typically
much more expensive
• Loan-To-Value ratio(s) are much more stringent than most conventional
loans
• All closing, management and other related fees are the responsibility
of the borrower
•
Loan will typically require 6-12 months of guaranteed payments,
no matter when refi’d
Typical Loan-to-Value ratios for Real Assets acting as Investment
Security:
(Loan to value or LTV is the maximum amount we will loan against
a property's verifiable value or purchase value, whichever
is less.)
Commercial: 65%
RawLand: 50%
Construction: 65%
Development: 50-65%
Income-Producing Commercial: 70%
How it works:
After thorough due-diligence on a loan request and the borrower,
we submit a summary of the loan and the borrower to our investors
for acceptance. Once the investor(s) have committed to fund,
our team then sets up an escrow through a third-party firm,
completes all legal paperwork, helps with the final signing
and then services the loan. Your monthly payment will be written
directly to a collection account managed by a company who specializes
in managing escrow and mortgage payments.
All fees are paid by the borrower for the life of the loan.
OPTION #2: SALE/LEASE-REPURCHASE PROGRAM
In our years of working with borrowers, we've discovered that
there are unique times when for one reason or another, a borrower
is able to afford the purchase of a property, but cannot obtain
traditional financing. A divorce or the rapidly growing problem
of identity theft can leave a person's credit score completely
devastated - even if they've paid their bills and have a good
job. Although we do not do a lot of these transactions, we do offer
them on occasion as an alternative to a high-interest private
loan.
How it works:
An investor with a good credit score (680 or better) and verifiable
assets can is willing to put up their personal credit rating
for a return of cash.
Qualifying Details:
1. A borrower has the opportunity to purchase/refi a property
with appraised value that is at least 20-25% higher than the
asking price.
2. The investor purchases the property on behalf of the borrower,
using the investor's credit and asset standing.
3. Borrower signs a lease-option purchase agreement to buy-back
the property within a given amount of time.
4. The borrower enters a credit repair program to restore
broken credit issues and prepare themselves for conventional
property buy-back.
5. The borrower buys the property back from the investor within
1-5 years.
Borrower Pros:
• Credit ratings are insignificant
• Funding can occur in about 4 weeks rather than months - if
at all.
• A low, prime interest rate is achieved rather than high-cost
interest due to poor credit
• The Investor and Borrower sign an agreement that the property
can not be sold by Investor to any other party unless Borrower
is in default. Yet, Borrower can sell property at any time
as long as contract details are met.
• Buy-Back can happen at any time after finalization of Investor
purchase.
•
Borrower’s enjoy the satisfaction of knowing they will
have credit toward the purchase of the property when they can
qualify for refinancing.
Borrower Cons:
• The Borrower pays the equivalence of 10% of purchase price
as a transaction fee.
•
Borrower makes a payment equal to (mortgage payment + amortized
property taxes + amortized property insurance + mortgage protection
insurance) plus 8% of the total of these monthly costs (or
the combination of these costs plus $300, whichever is greater)
to the Investor as a monthly “lease payment”.
• Late fees, default fees and foreclosure fees are much more
expensive
• Borrower pays appreciation to Investor (at buy-out) equal to
.0025% per month (3%yr)
• All closing, management and other related fees are the responsibility
of the borrower
•
Loan will typically require 6-12 months of guaranteed payments,
no matter when refi’d
• Borrower will be responsible for extreme cancellation fees
if in default of contract
• Borrower pays non-refundable, non-applicable costs involved
in the transaction
•
Borrower pays closing of Investor purchase and Borrower’s
re-purchase of property
Let's look at how this figures in
a real deal (12 & 24
month terms included):
This example is a single family residence on 10 acres. The
buyers built the home and needed to pay of the construction
loans but due to the subprime crisis, they were unable to find
a traditional lender who would write their loan. Therefore
they asked us to help them with a lease-buyback.
Appraised value of property: $360k
Purchase price of property: $340k
Loan amount applied for by investor: $340k
Because this was a second home, the investor had to put up
10% deposit in order to make the conventional mortgage lender
happy ($34,000).
The deposit is refunded to the Investor by the Borrower upon
close of escrow and receipt of funds.
This refund of the deposit made the balance of the loan $340k
minus 10% ($34k) = $306k
Therefore all calculations are based on the $306k instead of
the whole amount of $340k.
From proceeds of purchase, out of escrow, the Borrower pays
the Investor a non refundable lease transaction fee of $15,000,
and signs the lease-option/purchase contract.
From proceeds of purchase, and according to consultant contract
with The Equity Experts, a fee of $15,000 is paid for negotiation
and organization of the transaction.
The monthly payment to the investor is $3100.00 this includes
loan payment, property taxes, hazard insurance and a monthly
profit modifier equal to $300.00.
Upon buyback of the home (anticipated to be 12 months) the
Borrower will pay an additional appreciation of 3% per annum
for a buyback/sale value of the property.
EXAMPLE 1:
So to summarize the costs to the Borrower with a 12 month buy-back:
$15000.00 non-refundable, non-applicable Transaction fee
$15000.00 non-refundable, non-applicable Lease/Purchase Contract
Fee
$ 3600.00 Total of -12- monthly payment modifyers to Investor
$ 9180.00 12 month appreciation modifier (3% per annum)
$15000.00 Approximate closing & purchase costs x 2
(Investor purchase * Borrower repurchase)
$57,7800 Total costs to Borrower for 12 month Transaction
Value of Home in Mo. 12: $378,000
($360k + avg. 5% appreciation over 12 mo. Period)
Buy-Back price: $322,680 (includes $7500 in closing costs)
{$306,000 + $9180 (1st year appreciation modifier) + $7500 costs}
Additional Fees/Costs: $ 50,280 (spread throughout term of
contract)
Total Est. Cost of Contract: $372,960 (Buy Back price + Fees/Costs)
EXAMPLE 2:
Costs to the Borrower with a 24 month buy-back:
$15000.00 non-refundable, non-applicable Transaction fee
$15000.00 non-refundable, non-applicable Lease/Purchase Contract
Fee
$ 7200.00 Total of -24- monthly payment modifyers to Investor
$18635.40 24 month appreciation modifier (3% per annum)
$15000.00 Approximate closing & purchase costs x 2
(Investor purchase * Borrower repurchase)
$70835.40 Total costs to Borrower for 24 month Transaction
Value of Home in Mo. 24: $396,900
($360k + avg. 5% appreciation over 24 mo. Period)
Buy-Back price: $332,135.40 (includes $7500 in closing costs)
{$306,000 + $ (2 year appreciation modifier) + $7500 costs}
Additional Fees/Costs: $ 63,335.40 (spread throughout term
of contract)
Total Est. Cost of Contract: $395,470.80 (Buy Back price +
Fees/Costs)
OPTION #3: JOINT
VENTURE PROGRAM
Unlike our previous investment programs, the joint venture
investment option is perhaps one of the most variable of options
for a Borrower.
In the case of a JV transaction, the Investor funds a loan/financing
request for a lesser interest return on principal plus an ownership
stake in a real estate property/project.
Although the terms on such transactions will vary according
to the details of each opportunity, we typically attempt to
arrange the following terms :
This is an illustration only, and cannot be construed as an
absolute model for every JV investment:
Project: Housing development (55+), 720 units
Project End Value (projected): $210,000,000
Projected End Value Net Profit: $ 60,000,000
Investment Requested: $ 10,000,000
Ownership Share for JV capital: 70%
Buildout schedule: 7-10 yrs.
Return: Year 1-4 : Repayment of principal investment + 10%
interest
Add'l years: 70% of Net Return
Total Return:
$10,000,000 Principal, plus 10% interest on unpaid principal
until paid back; plus
$32,000,000 Ownership share of Net profit
Avg. Annual ROI (based on 10 yr. Build out & 10% interest
over 4 years) 36%
Pros:
• Higher cash involvement from investors
• Lower interest rates, often deferred to exit of principal payoff
• Management help/oversight by professionals
• More negotiable terms
• Credit/Refi support for future take-out loan(s)
Cons:
Only qualified borrower/partners considered to be an investment
opportunity
• Market variability
• More cost related to funds borrowed
• Outside interference/cooperation with project
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