Birds Eye View
Birds Eye View property picture
Property ID #401

Why we like this deal?

The borrower would like to refinance this iconic and well-recognized 26-unit apartment building settled on Dayton’s most exclusive waterfront location. All but one unit is occupied and the borrower wants to refinance the building’s $290,000 Land Installment Contract, use $10,000 to rehab the remaining unoccupied unit, and have cash left over for closing and capital reserves. The building has been fully rehab’d since its purchase in 2005 with new kitchens, hardwood floors, HVAC, electric, etc. The $1M valuation is based on an 8.5% cap rate (as opposed to comps or an appraisal). Net Operating Income is currently $60,000, which provides for a strong DSCR.

The borrower has been in real estate his entire life. He lives in the building and has a significant equity investment. He has a good credit history, but a weak credit score, in part because his best trade lines are not reporting to credit agencies. (e.g. He has a $15,000 line of credit with Ace Hardware in good standing, but unreported.)

The loan to value (LTV) provides a 65% cushion of equity. Additionally, the rental income is $123,000 annually and is 4.85 times the debt service coverage ratio (DSCR). This opportunity presents an investor with a commercial note at 10% for 2 years, secured by a recorded first mortgage lien or deed of trust on this property.

Why the bank can't lend

The local credit union is overwhelmed with loans and has an unacceptable turn around time. And the local bank has an issue with the borrower's credit history: Five years ago he received a bad check for a large sum, which led to a dispute with City National Bank. He went to court and lost, with an $11,000 judgement entered against him which still shows on his credit record. The judgment will come off the record in 2.5 yrs. Therefore, a three-year loan will carry him to the point where he can refinance through a traditional lender.

Risk Analysis

We consider the risk to be medium/low relative to the loan to value (LTV).
Property Summary
Property Type: Apartment
Property Value: $1,000,000
Loan Amount: $350,000
LTV: 35%
GOI: $123,000
DSCR: 4.847
Loan Term: 2 years
Amortization: interest only
Recourse: no
Cross Collateral: no
Max Rate: 10%
Borrower Summary
Source of Income: Monthly Rents
Documentation: Available
Guarantees: no
Payment History: N/A
Risk Summary
Overall Risk: medium/low
Market Risk: low
Property Risk: low
Borrower Risk: medium