Case Study- $4.3 Million Fix and Flip Loan



We recently closed a $4.3 million fix and flip loan for a property in Sands Point, NY.   This was one of our larger loans for single family residences (SFR).   Typically, our fix and flip loans for SFRs are capped at $2 million, although lending in high price cities has lead us to increase our loan limit for SFRs recently.

What made this deal different?  There were a few things.  First off, this was a unique property.  This property was situated on 7.5 acres in prime Gold Coast waterfront property.  For those of you who don't know, the Gold Coast of Long Island the North Shore of Nassau County.  This area was made famous in F. Scott Fitzgerald's The Great Gatsby.  The combination of the area's beauty and it's close proximity to NYC makes it a very attractive place to live.  The median income in the area ranks amongst the highest in the nation.  

We were quickly able to get comfortable with value given the properties size of 7.5 acres. Our borrower purchased this property from an estate for $5.75 million.  We felt he was getting a great deal given the land value.  We estimated that the land value along would be north of $1.0M/acre, with the lots closer to the water being worth substantially more.  

There were also multiple options for monetizing this property.  The first is to renovate the existing structure for a quick flip.  The main house was in good condition and just needed some cosmetic renovation.  We estimated that the property only needed about $200,000 of renovations.  After the renovation, we estimated that the property would be worth an easy $7.2M.  

The other option for this property was to subdivide and either sell off the lots individually or develop new single-family residences.  These options would yield higher returns, but they would also require more time and investment on behalf of the developer. 

The other factor that led us to get comfortable with this deal was the strength of our borrower, or sponsor.  The sponsor was an experienced real estate investor with significant liquidity.  Additionally, our sponsor was putting in about 30% of the equity in the deal, which meant they had significant "skin in the game."   

In the end, we were able to get comfortable lending outside of our "box" because we felt this property had significant value in it, as well as we had an experienced borrower that was coming to the table with a large amount of equity.  Value, experience, and sponsor equity are the three most important factors when looking at a deal.  We were super excited to get this one done for our borrower. 

 

Press Release for this deal.

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