A “SAMPLE” Single-Family New Construction Loan Investment Scenario
Twofold Return/Remittance Under the Note 23% (= $119,600) – See “A” and “B” below.
A: PRORATED INTERIM: 8.5% APY ÷ (12 monthly payments) = $44,200 PLUS…
B: LUMP-SUM AT MATURITY: An additional 10.50% Interest Payment (=$54,600)
PREMISE: Builders Commercial Capital Group, LLC (BCCG), has issued a loan commitment to a local home builder/general contractor that intends to buy a finished, shovel-ready lot on which to build a 3,298 square-foot, four-sided brick single-family home. The use of proceeds for the entire project is as follows:
- Vacant Lot Purchase: $50,000
- Home Construction Costs: $375,000
- Soft Costs: $8,235
- Interest Reserves Amount: $44,190
- Closing Cost Coverage: $9,548
- BCCG Loan Origination Fee: $23,871
- Underwriting/Legal Fees: $9,155
- Total Loan Amount: $520,000
MARKET VALUATION: When BCCG ordered the appraisal, the final value was $800,000, which is being set over as a note one fatal investment summary to the servicing company. Additionally, the builder’s real estate agent concurs that she can aggressively list and market the property for $799,000 within three months after the improvements are completed. After underwriting the loan for funding, BCCG arrived at a final loan-to-value ratio of 65%.
INVESTMENT OVERVIEW: The $520,000 loan was underwritten with a 10.5% “profit participation” interest (equaling a remittance of $54,600) due and payable when the home is sold. In addition, a prorated 12-month interim interest rate remittance of 8.5% (the current WSJ prime rate) will be prorated equally over twelve equal monthly installments during the loan investment term.
EXIT STRATEGY: On the date of the property’s sale, the title company, as instructed by BCCG, will deduct, withhold, and remit loan repayment proceeds (minus loan servicing fees) from the sale of the rehabbed home. BCCG’s loan servicing agent will deposit these proceeds into the investor’s account via ACH.
LOAN INVESTMENT PARTICIPATION STRUCTURE: The $520,000 Loan Investment is offered in twenty (20) Loan Participation Notes (LPNs) at $26,000 each.
LOAN REPAYMENT STRUCTURE (WHOLE NOTE):
- Loan Term (in months): 6
- Whole Note LTV: 65%
- Monthly Interest-Only Payment: $7,365
- Principal Loan Amount (Balloon Payment): $520,000
- Due-On-Sale Interest Rate Payment: $63,700
- Due-On-Sale Interest + Balloon Payment: $583,700
LOAN REPAYMENT STRUCTURE (PER LPN):
- Loan Term (in months): 12
- Fractional LTV: 3.25%
- Monthly Interest-Only Payment: $7,365.00
- Principal Loan Amount (Balloon Payment): $26,000
- Due-On-Sale Interest Rate Payment: $2,730
- Due-On-Sale Interest + Balloon Payment: $29,185
The above scenario revolves around a single-family residence for illustration purposes only. To review actual upcoming construction loan note investment summaries, please click here to register with our investor relations department.