Pacific Private Money recently closed a high % funding for a rehabber buying in Boulder Creek, CA. We did this through the creative use of a 1st and 2nd loan combination. The first loan funded at 70% of the purchase price in the amount of, $104,900, and the second for $145,000 (65% ARV). The purchase price was $149,000 on this fix and flip property. The beauty of this transaction was the successful partnership between an experience rehabber and an equity partner who created a strategic shared appreciation mortgage, also known as a ‘SAM’ loan.
Working with an equity partner can be a very tactful move for a ‘rehabber’ because it gives them the opportunity to enter into a loan with less money down as compared to traditional hard money loans. On the other side; lenders benefit from serving as equity partners because they earn a percentage of the revenue generated from the ‘flipped’ property.
A SAM loan is a unique type of mortgage that is designed to serve as a form of equity release. The investor loans the borrower a significant amount of the property purchase price and remodel expenses; in return for a percentage of the future sale of the property. Sam loans continue to grow in popularity due to the fiscal benefits that can be derived by all parties involved. Pacific Private Money works with a group of investors who recognize the value of these mortgages and welcome such investment opportunities. There are a few key factors that a rehabber must be aware of in order for this type of transaction to make for a fundable deal. First of all, they must be realistic about what the property can be sold, flipped, for once it has been fixed. This includes allotting an extra 10% of total estimated costs for possible unexpected expenses. They must also be able to provide a detailed budget which will need to include an estimate from a contractor. If the borrower can produce all the needed documentation to prove they have a strategic fix & flip scenario; then Pacific Private Money can assist in finding an equity lender and guide the borrower to make this a successful investment.