Dave Knudson Gravity Capital. Today we are talking about Real Estate What it’s worth and the reason I’m bringing this up is because I’m getting a lot of brokers coming to me who are just starting potentially like you, and they want to know, what do I do first?
Let’s say I have somebody who wants to borrow some money, they have a piece of property, what is it I do? This is very simple, right? So all you’re going to really need to give me is an address, and address of the piece of property and now I’ll tell you why.
First of all, we lend on these properties: residential, apartments, commercial, industrial, churches, land, hotels, restaurants, whatever it is we can determine has a value we will land on and again remember, we don’t want to lend more than 50 percent loan to value. So if the property’s worth a million dollars, we only want to lend 50 percent of that, and that is $500,000. So, you’ll find somebody who wants to borrow some money, you’ll determine which one of the properties it is, you’ll give me the address, and then I’ll tell you what we do with this. And again, a lot of you guys may be investors yourself and want to do your own loan bills and I totally support that. If you want to use us to just to let you know what we do, go out and do it, and if you have any questions about a loan you may want to do yourself, we’re happy to help you through no matter what it is. We can get you attorneys, we can get you title work, we can get you BPOs, we can get you all kinds of stuff. So keep that in mind if you want to do these loans yourself, we’re happy to help you with no fee, hoping you’ll bring us a loan down the road.
When we first get the address, and you may want to do this yourself, you’ll give us an address. The first thing we’ll do is to run a Google Earth, we’ll try to find it on Google Earth to see what it looks like. Certain properties we don’t like lending on small rural properties are kind of scary because it takes forever to sell them. So oftentimes, you’ll give us an address, we’ll look at it, if it’s real small on Google Earth, rural, we may pass on it. But, let’s say that you give me a big commercial building, right. Google Earth can take a look at it.
Next, Josh will run a tax assessment on the property. What a tax assessment is, again some of you guys have come to me very green, not knowing what a tax assessment is. So for those who don’t know, each county will take a look at each property and assign it a number. They’ll give it a number, and they’ll have typically a County Assessor or a County Appraiser. The county appraiser will take a look at each one of these properties, they’ll give it a value. It’s kind of nice because nowadays some of the counties area actually very good at it. When you buy and sell a piece of property unbeknownst, you may or may not remember this, you’ll be usually required to send to the county assessor the amount of what you paid for a property. You send all this information into the county assessors, they can now compile that and put it in a big computer system and they come out with a pretty close tax assessment of what these properties are worth. Yes it’s not always a hundred percent, often times it’s low, usually it’s not high, but every now and then you’ll find one that is.
So we’ll Google Earth it, take a county tax assessment number. We’ll take a look at it based on our assessment of that, and that will give your borrowers and idea of how much we will lend to them and will also tell them how much we charge. Which will be a percentage rate of an interest rate, points that we charge, and how long the term will be, and what the payment structure will be, which is typically one year, monthly interest only payments.
We do this if you give a tax assessment. We give them an idea of what we lend them, we tell them what the rate is. By the way, we send this in a LOI well’s pull up on the screen afterwards so you can take a look at it, copy if you want to, use it whatever you want to do with it. Then they send the LOI back and say yes I like that number, I’ll borrow this money from you. After that we’ll run comparable sales we have pretty sophisticated software that compiles information from all over the country. So we can put an address in this, we can pull up a big circle up in area that’s close this property, and we can give you a pretty good idea of how much is worth based on those comparable sales.
After that we always try to get two or three broker price opinions, a broker price opinion is an appraiser, or not an appraiser but a realtor, that will tell us how much they think this property is worth. Realtors are a great resource. You get a good experience realtor, they will know pretty close what this property is worth. Then we talk to neighbors in the area. Some of the best people on the ground in different areas will be some of the people that live around this which will commercial people, which will be neighbors, which will be whatever. And they’ll give you a pretty good idea of what’s going on with that property, it’s a great resource and most people are just happy to talk to you if you’re friendly.
I have looked at land before not knowing much about it, but before I went out there, I have found some pretty amazing things about the property. So talk to neighbors.
And the last resource we use if we can’t zero in on this, but we think it’s worth doing, sometimes we’ll get an appraisal. Usually we always get an appraisal after we make a loan on property just to see how close we are, see how good we’re doing. So those are the steps that we take to get an assessment, and the only thing we’re doing that for is to get an idea of what the value is, to make sure that it’s worth 50%.
After all of this is done, and we’ve all agreed and we think there’s a deal, then Josh or I will go out and take a look at every property that we lend on to make sure that it’s as described. That’s the Real Estate evaluation. It’s worth, it’s a lot more involved sometimes. it’ll take you 3 or 4 days to get the right amount of information on any properties. And we like to do all of this before we actually go out and look at the property, but again, it could be quick, it can be fast and sometimes it can take a little longer, that’s what we do.
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