Opportunity to be lender - deal analysis?

Question

I have an opportunity to the be the lender on a 4-plex REO that will be fixed and filled at 45K in Dayton, OH. The rents are 425/unit conservatively - section 8 rents are 480/unit.
                        
                        I get paid 12% on the loan - 12 month term. I would also have 1st rights on purchasing the property outright after it is rehabbed and filled.
                        
                        This would be my first hard money loan - any thoughts would be greatly appreciated!

Jon Holdman · Answer

Be sure you evaluate the deal based on the Dayton market, not on what you know of Denver. Personally, I prefer to stay local where I cab touch the property. That said, the numbers are much better than anywhere in Denver.

Brandi T · Answer

Mike, There are no deals in Denver for under 50K investment that would throw off cash like this one would.  That being said, given the vacancy rate in Dayton if the property can't be kept fully rented it won't have the cash flow!

I'm leaning toward keeping my money local and looking for a flip.

Michael Rossi · Answer

SCREEN THE HECK OUT OF THE "INVESTORS"!  There's a reason that they are using hard money and it's not because they are financial giants!
            
            Many hard money lenders have been slaughtered during the past few months - don't be one of them!
            
            Mike

Michael Rossi · Answer

If they have a proven track record, why do they need to borrow hard money?  I have a proven track record and I certainly don't pay 12% to a hard money lender for rentals!!!

Dayton, like most of the rest of flyover country is fine for rentals - that's not in dispute.  The question is why does a successful investor need hard money and why would you want to buy the property if you're providing hard money?  If you're going to buy a rental, why not just use your money to do so and keep all the profit for yourself?

Good Luck,

Mike

Brandi T · Answer

They have a proven track record in the Dayton area although they are located in Colorado.  They have a team in Dayton that does the rehab, management, etc.

What are you thoughts about Dayton?