Hi, this is the deal of the day. We are going to try to do the deal of the day. We will try to take you through deals that come in, loans that we don’t do, loans that we do, problems, foreclosures, bankruptcies any and all of the above that happens at a hard money company like Gravity Capital.
Today we’re going to talk about the loan of the day, actually we’ve been working on this for a couple of months. Loan of the day is this and this will describe one of the loans and some of the things we typically do at Gravity Capital.
We have a customer in Austin Texas, but actually has some restaurants in Florida. This person needed to borrow some money. She had a bunch of collateral, but she didn’t make much money on her restaurants. She had borrowed some money from WBL, which is another company that does what I would call a merchant loan.
A merchant loan is a loan that you can do at a restaurant that bills daily, or people come in daily, and they run a bunch of money through their bank account. And a merchant loan is a loan that will take the balance of the money that is run through the bank on a daily basis, and they will lend money based on that cash flow that goes through the business. And if the business has been in business for a while and they’ve had money running through the bank for now and they’ll get some money based on that. Now the interest rates are very high, sometimes upwards of 100%, and they take money out of the bank account daily. We pay off a fair amount of this loans, because these merchant accounts are so expensive the payments are so high. People get into this to solve short-term problems and then they need to get out.
Typically some of these merchant accounts will actually lend money based on the collateral of the real estate, this is one of those accounts. We will call the borrower that I’m dealing with Monica. So Monica happens to have, Monica and her family, her sister, her mother, her father, were involved in the business and owned five separate pieces of property.
So, Monica owns a commercial building in Austin, another one in Austin, and another commercial building in Boston. Each of the buildings are in an amazing area, and are actually on a street called Cesar Chavez in Austin, Texas. Very highly sought-after area. Each of these properties we believe are over $700,000.
So Monica wants to borrow, by the way, $2,235,000. Now if you think about these 3 properties, each worth $700,00, that’s $2,100,000 in total. Remember the number that I was trying to stand by, 50% loan to value, so Monica right now doesn’t have enough money or enough collateral to borrow this amount of property.
And Monica’s family also happens to have 50 acres just outside of Austin, Texas that includes a 6 thousand square foot house, very nicely done, 50 acres, two other houses on this property, wedding facilities, a chapel, and another 12 acres down on the highway. We have an appraisal on all of this stuff of $2,500,000. So if you take $2,500,000 plus $2,100,000, you have $4,600,000. So again, we are staying at a 50% loan value. 50% of the value of the property is $2,300,000.
So, we’ve researched all these properties, we have an appraisal, we have broker price opinions, we have a bunch of information about the areas, locations, lease rates, square footage prices, land prices, and we would feel very comfortable with this value right here.
Now, after you get all of this lined up, what we waited for next was title reports, to make sure that Monica and her family owned these properties. So we got the title reports on all of these properties from First American Title, the title company that we almost always use, that will give us title insurance and give us the comfort level that they actually own them.
And right now on a point were, Monica’s family, mother and father actually lived down in Colombia, so we need to get Monica’s father and mother to come up to Texas and we’ll get them to sign the loan documents so we’ll have them prepared in the next few days. When they come up they’ll sign the documents, we’ll fund the loan, and this will be our deal of the day.
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