San Clemente, CA

$900,000

Residential Land

Residential Ground-Up Construction

04/30/2015
Transaction by
Lantzman Lending
Lantzman Lending provided a $900,000 hard money loan to a real estate developer for a residential construction project in San Clemente, Orange County. The Developer (borrower) had located & negotiated the price & terms for the subject property, a vacant raw land parcel. They were then approached by an Investor wanting to do a joint venture using his IRA. When the new JV partner realized it was a prohibited transaction, he purchased the land and then sold it back to the developer with the Investor's profit being paid upon the sale of the completed project. The Developer & Investor set up an agreement to allow the acquisition & construction loan to be in 1st lien position followed by a land note secured by a 2nd Trust Deed. This enabled us to be in the 1st lien position and fund the purchase, 100% of construction costs, and include an 18-month prepaid interest reserve in an escrow fund control account. Essentially, the Developer didn't have to come in with any funds, which allowed them to focus on their core competency of construction development. The land is going to be developed into a 3,400 square foot duplex composed of two 1,700 square foot condos, each with 3 bedroom and 3.5 baths, 2-car garage, and a rooftop deck. Both units are expected to sell for a total of $1.5M so the LTV for this hard money loan is 60%, and the interest rate is 12%.