The First BIG Loan #21
Bill Fairman (00:04):
Hi everyone. Thanks again for joining us on the show today. My name is Bill Fairman, with Carolina Capital Management. This is my lovely sister.
Wendy Sweet (00:13):
Thank you. That is much better.
Bill Fairman (00:14):
Wendy Sweet. She is also my partner. So, today, we are going to talk about the biggest loan we ever did.
Wendy Sweet (00:22):
No, the first big loan.
Bill Fairman (00:25):
The first big loan we ever had.
Wendy Sweet (00:25):
We had a lot more bigger than that.
Bill Fairman (00:26):
So one of the things that we do here is we lend money for people that are doing fix and flips and buying holds and value add.
Wendy Sweet (00:37):
Bill Fairman (00:39):
Apartment complexes. You can find out more information on that at www.CarolinaHardMoney.com. When the page pulls up, you can either just hit the button that says apply now, or if you just have some questions you want answered, we have an ask an expert tab that you can click on. And it will just shoot us an email and somebody else will.
Wendy Sweet (00:59):
Try to find an expert to answer for you.
Bill Fairman (01:01):
Yeah, we will tell some friends.
Wendy Sweet (01:04):
We have got a life line or two.
Bill Fairman (01:14):
So, we had a customer that went into a neighborhood that was really, seriously up and coming. You know, we were in the Charlotte market and this was, you know, 2012 and the market was just starting to boil.
Wendy Sweet (01:31):
It was just starting to boil.
Bill Fairman (01:31):
And we were approached with, I mean it was a huge loan for us when we started in business, our average loan size, sixty to sixty-five thousand dollars. And this one was in our portion of the loan was in the 600,000 range.
Wendy Sweet (01:47):
It was scary.
Bill Fairman (01:48):
It was pretty scary for us, but it appraised for more than we thought.
Wendy Sweet (01:56):
And he was a builder. An experienced builder.
Bill Fairman (01:57):
And again, the guy was an experienced builder and he was just moving to a new area.
Wendy Sweet (02:02):
He had plenty of money in the bank. He had great credit scores. He was a great, really good risk.
Bill Fairman (02:06):
So we took the plunge and everything was going, everything was going swimmingly. You got the house under contract, right?
Wendy Sweet (02:16):
Bill Fairman (02:16):
And it was many bedroom. Well, it was not many bedrooms. He had actually built a library in there and the person that, you know, wanted to buy the house, had it under contract, took a $10,000 deposit. But that person wanted to take the library and now turn it into a bedroom. So I had to do some extra work, put in some walls, you know, add a closet because it is not a bedroom. Was that a closet, right? And after he completed all the work ready to sell the house.
Wendy Sweet (02:50):
She backed out.
Bill Fairman (02:50):
She changed her mind.
Wendy Sweet (02:52):
Yeah, which is a woman’s prerogative. That is what we do.
Bill Fairman (02:55):
And what was the downside for our borrower?
Wendy Sweet (02:57):
Well, he was stuck with a house that did not have the library and now had the bedroom. Oh, that went bad. He had 10 more thousand dollars leftover, didn’t he?
Wendy Sweet (03:11):
His loan lasted a whole lot longer than he had hoped it would.
Bill Fairman (03:13):
And what was the consequences of that?
Wendy Sweet (03:15):
Well, in our market at the time, remember it was just beginning to boil. So the price range of all the houses around were just increasing, increasing. So that was really okay.
Bill Fairman (03:28):
Okay. I get the hint, Wendy.
Wendy Sweet (03:28):
Okay, we will just say it.
Bill Fairman (03:34):
But there is a maturity date on our lives, is there not?
Wendy Sweet (03:34):
Did we have that?
Wendy Sweet (03:36):
And that time, I think it was nine months too, wasn’t it?
Bill Fairman (03:39):
You know, we were not doing twelve months. We were doing nine months. But his loan was going to have to go into an extension. And when you go into an extension, you have to pay additional points for the extension of the 90-day period.
Wendy Sweet (03:52):
Two more points.
Bill Fairman (03:52):
And remember this is a $600,000 house.
Wendy Sweet (03:55):
So, that was a pretty gash.
Bill Fairman (03:58):
Two percent of the 600,000 is what it is costing plus mortgage payments.
Wendy Sweet (04:07):
Twelve thousand dollars.
Bill Fairman (04:07):
To continue this, now.
Wendy Sweet (04:10):
Bill Fairman (04:11):
What ended up happening?
Wendy Sweet (04:12):
I don’t remember. So they can set it all the first time the market was going up.
Bill Fairman (04:21):
So this guy was falling in. He is making mortgage payments on a house that someone backed out on. He had extra expenses.
Wendy Sweet (04:31):
Made all those changes.
Bill Fairman (04:32):
Moving the walls and making the closet.
Wendy Sweet (04:37):
He was mad at us.
Bill Fairman (04:37):
He did get $10,000, but that didn’t cover his extension fee.
Wendy Sweet (04:39):
He was mad at us because of the date.
Bill Fairman (04:41):
But as it turns out, he ended up getting a contract there shortly after the price was increased by 20,000 because the market was really on an up swing at the time. And then, so he ended up making more money and then selling the house and everything was great. Again, that happens in up markets and you have to be careful in anything you are doing real estate because markets change. Could have the same effect and market could have gone down and now he had been upside down.
Wendy Sweet (05:18):
Right. And it’s just as likely that that can happen at anytime and it’s more likely that that is going to happen these days, right?
Bill Fairman (05:24):
But my rose-colored glasses always want to do the success stories and not this guy is falling in the story. So this worked out great for him. He still made plenty of money on this thing more than he thought in the first place. And he came out smelling like a rose.
Wendy Sweet (05:44):
That is right. But as lenders, we were sitting in a great position either way. Because we knew we were going to get our renewal thing and the market is still going up.
Bill Fairman (05:54):
Right. And our investors are protected because when we make a loan we have, typically, a 30% or more cushion between the value of the home and what we live on.
Wendy Sweet (06:07):
And that 30% was increasing because the values were increasing. So that was a really good position for us to be in.
Bill Fairman (06:12):
So, if you are an experienced builder, or borrower, real estate investor, we would love to talk to you about seeing if we can help you on the lending side of things. Now, there is plenty of avenues for lending in this space where you don’t want all your business. We just want to be one of your tools in your toolbox. We encourage people to look for private lending as well, but private lenders do not have infinitely deep pockets.
Wendy Sweet (06:42):
Well, sometimes people use all of those means for the same deal.
Bill Fairman (06:46):
And then, at the same time, banks or a good way to go. But banks do not have the speed that companies like ours do. So if you are interested, again, we said www.CarolinaHardMoney.com. Click on either the apply now or ask an expert and we will find one for you. You got anything else to add?
Wendy Sweet (07:09):
Can I think of an expert answer? I don’t know. I will have to think on that.
Bill Fairman (07:12):
All right, so I was gonna throw this to you. But make sure you share and like. We have some video archive. Where would that be, Wendy?
Wendy Sweet (07:21):
It’s here or here or here or over there.
Bill Fairman (07:24):
Depending on the platform. And what else? Oh, www.CarolinaHardMoney.com is the web address where you can find us. We’re bill and Wendy Carolina Capital management. Have a lovely day.