Realty411 - Featuring Dr. Chander and Iva Mishra | Page 34

• Leveraged existing real estate equity developed over time to borrow additional funds , purchase other investment properties , or invest in a business enterprise .
• Purchase a property with some cash down payment , sweat equity , and seller ’ s agreement to carry back a subordinated junior lien . The property seller would have the borrower sign a promissory note and a deed of trust with a set interest rate , payment schedule , and due date . The subordinated second is recorded concurrently with the first trust deed but with a recording number after the first .
• Inherited property where family members and successor trustees who are beneficiaries need funds for distribution to the beneficiaries , pay the estate ’ s legal costs or fix up the property for a future rental . Another option is fixing it and selling it on the open market .
• Loan on unimproved raw land . Loaning on raw land can be a complex process . Is the land parcel part of an existing subdivision , referred to as an infill lot , a commercially or industrially zoned parcel within a subdivision , or a larger parcel held for future development ? The borrower may need to use the property as collateral to raise funds for future entitlements , including engineering , architecture , various reports , and fees to develop a fully entitled parcel ready to be built . The borrower would pay the loan off as part of the construction loan .
• Retail strip and community centers , industrial or other properties that require upgrades or repositioning : Many centers are distressed due to the COVID shutdown vacancies , where tenants could not pay rent .
• Fix­and­flip loans allow high­frequency purchasers to purchase a distressed property , rehabilitate it with the expectation of resale , and turn a quick profit . Borrowers need both experience and some of their capital at risk .
• Litigation settlements : A loan to buy out a business partner , pay off a pesky family member , an ex­spouse , a judgment lien , or a partition suit .
• Pay off civil judgments and liens , including arrearage in property taxes , association dues , and federal and state tax liens .
• Sale of existing promissory notes and deeds of trust to 3rd
party investors : The sale is usually at a discount , whether the promissory note is performing or non­preforming . A deal will free up cash .
• Hypothecation or pledge of a promissory note and deed of trust : A borrower who owns a promissory note and deed will assign them to a third­party investor as collateral for a new loan .
• Cross­collateralization of more than one property : Multiple properties are required to meet the lender ' s equity requirements . The borrower would sign one promissory note but have recorded liens that encumber two or more properties .
• Small mobile homes or trailer parks : properties that don ’ t meet the underwriting standards of institutional lenders .
• Vacation , Short­term , and rental income properties ; Financials and history are necessary to prove the ability to make payments .
• New ground­up construction or construction completion for a partially completed project : Most requests result from borrowers needing to fund additional dollars to complete the project when they deplete their capital or existing construction loan proceeds .
• Collateral combines real and personal property , such as a motel , restaurant , carwash , or gas station with mini markets . A recorded trust deed encumbers the real property , and a UUC­1 financing statement will be filed with the Secretary of State to encumber the personal property . The valuation and decision to make the loan must be on the real property only .
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