It’s been a very long time in the making – five months – but I am now making my first investment with my self-directed IRA! I opened the bank account two weeks ago, the hold on my initial deposit check ended last week, and now I’ve found a new hard money investment. This one will be all the more sweet since it will be made using funds from my self-directed Roth IRA, and thus the profits will be tax-free!
My partner has another hard money lending opportunity. This one is for a mortgage of $224,000 on a property the borrower purchased at auction for $321,000, giving us a 70% LTV ratio. (Well, loan to purchase price ratio, anyway. The actual value of the property is somewhat variable, as I mention below.) The property is a single story, single family home in central California. It was built in 1951 and is a 3 bedroom / 2 bath property with 1020 square feet. It has an attached single car garage. The previous owners were out of town owners renting it out.
Comps range from $380,000 to $420,000 from another investor who has never seen the property, but knows the area, to $370,000 from automated sources (Zillow and ForeclosureRadar) to $350,000 from a Realtor who looked at pictures of the property but did not check the MLS. Given the wide variety in comp values, I would expect this property to take a little longer than typical to sell. Back in 2007, the last time it was listed in the MLS, the average days on market for the area was about 4 months. And the listing price for this property back then was $600,000. This property is located in the same city the property for hard money #10 was in.
Investment is standard terms – 10% interest only payments, loan term of 1 year with balloon payment due at loan end. This loan will be labeled hard money #13.
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