Villa Rica Residential

Blackburne & Sons is pleased to present this first security deed, secured by a 3,311SF, 3 bedroom / 2 1/2 bathroom single family residence, on a 2.91-acre parcel, located in Villa Rica, Georgia.

The borrower is refinancing this property due to a matured note. This note matured in July of 2020. The current lender tried to foreclose, so borrower filed a Chapter 11 bankruptcy in order to stop the foreclosure and give him time to refinance with Blackburne & Sons. The bankruptcy will be dismissed prior to closing. The borrower currently owes $203,366 on the existing purchase/rehab loan. With the payoff and closing costs, the borrower will need to bring approximately $6,000 to closing, and therefore will not receive any cash out.

COUNTY INFORMATION

Villa Rica is a unique city and is located in two counties, Carroll and Douglas.

Carroll County is a county located in the northwestern part of the State of Georgia. As of the 2010 census, its population was approximately 110,527. Its county seat is the city of Carollton. Carroll County is included in the Atlanta metropolitan area Atlanta-Sandy Springs-Roswell, GA Metropolitan Statistical Area. It is located just east of the boundary with Alabama. The largest industries in Carroll County are manufacturing, retail, and educational services. Carroll County is home to the University of West Georgia.

Douglas County is a county located in the north central portion of of Georgia. As of the 2010 United States Census the population was 132,403, having nearly doubled since 1990. The county seat is Douglasville. Douglas County is included in the Atlanta-Sandy Springs-Roswell, GA Metropolitan Statistical Area It has attracted new residents as jobs have increased in the Atlanta area. The largest industries in Douglas county are elementary & secondary schools, restaurants & food services, and construction.

CITY INFORMATION

Villa Rica is in Carroll and Douglas counties in the U.S. state of Georgia. Located roughly 30 miles west of Atlanta, a decision to develop housing on a large tract of land led to a major population boom at the turn of the 21st century: the population was 4,134 at the 2000 census; it had grown by 238%, to 13,956, at the 2010 census; and is estimated at 16,058 in 2019, nearly quadrupling its population in just 19 years.

Per the city website, "Jobs, a relatively low cost of living and access to healthcare and excellent schools are responsible for the city’s 5.1 percent population growth since the 2010 census. The city is currently experiencing an uptick in growth with an average of 24 persons moving to Villa Rica each month thanks to new industry and the expansion of existing businesses throughout the community." The largest industries for Villa Rica include manufacturing, healthcare & social assistance, and retail.

SUBJECT PROPERTY DETAILS

Built in 1977, this traditional style two-story single-family home consists of 3,311SF. It has 3 bedrooms and 2 1/2 bathrooms and is located on a 2.91-acre lot. It has a 1,284SF full basement. The property has central air conditioning, gas heat, one car garage, dishwasher, refrigerator, range/stove, microwave, and washer and dryer and new hardwood floors throughout. The house is currently vacant. The property is on septic, and we have required the borrower to get a septic inspection prior to closing.

The guarantor purchased the subject property in 2019 for $75,000. He obtained a purchase and rehab loan in the amount of $200,000, but the lender would only advance $175,000. The contractor underestimated the costs and the lender would not advance anymore funds. As a result, the borrower spent roughly $87,000 out of pocket to complete the rehab. This included his down payment, soft costs, engineering costs, completion of rehab and property survey. The property was completely renovated including electrical, updated kitchen, plumbing, flooring, new bathrooms, and new roof, per the borrower.

The borrower’s end goal is to subdivide this property into 10 residential lots aside from the lot that the house sits on, and then will sell them all off individually. The borrower believes the value of this property will be $850,000 once the 10 additional lots are subdivided, however we did not get an after repair valuation because our loan is not handling the subdivision portion. The borrower will take care of that on his own. Due to the fact that the borrower will be selling off individual lots, we have added a partial release clause to this loan. The borrower wants to keep the house vacant while he is subdividing the property.
The borrower currently owes $203,366 on a purchase/rehab loan. With the payoff and closing costs, the borrower will need to bring approximately $6,000 to closing, and therefore will be getting no cash out. Due to the fact that the loan matured in July of 2020, and issues that rose during the rehab process, the borrower was forced to file Chapter 11 bankruptcy on December 6, 2021 in order to stop foreclosure. See a detailed letter of explanation from the borrower in the due diligence package.

BORROWER SUMMARY

The guarantor is a married man, who will hold title through a corporation; of which the he is 100% owner. The wife will not be personally guaranteeing this loan. This corporation is a real estate holding entity that does not earn any income. Therefore, the entity does not file separate tax returns.

Our borrower is a personal injury and business reorganization attorney and has a mid-credit score of 699. He reports a personal net worth of $1,150,947. In 2020, his personal adjusted gross income was $176,086 and in 2019 his adjusted gross personal income was $149,678.

VALUATION SUMMARY

We hired a local appraiser who valued this property with an AS-IS appraised value of $327,000.

At an 8.0% yield to the investors and a 65.0% LTV (AS-IS) Appraised Value this appears to be a reasonable investment. Investing in any first trust deed involves substantial risk, so be sure to read the Risk Factors section of the Offering Circular carefully before investing. A large and prolonged decline in real estate values is possible. Foreclosed commercial properties almost always need to be renovated before they can be leased or sold, so be sure to maintain some liquidity.

You should spread your mortgage investment portfolio out among lots of different deals. If you have $300,000 to invest, you should invest $10,000 to $20,000 in 15 to 20 different fractionalized first trust deeds. For example, if the deal is a $300,000 first trust deed on an office building in Boise, with a $15,000 investment you would own 5% of the loan. By spreading your money out into a bunch of different deals, you are achieving the diversity of a fund without the failed fund sponsor problem. If you are extremely wealthy, you could double (or even triple) my suggested investment amounts, but be careful about pouring too much money into a single deal. We once had a whole building fall into an old coal mine. Ouch.
Be wise and resist investing in any first trust deed yielding more than 9%. I would personally never invest in a first trust deed with a double-digit yield. The payments slowly grind the borrowers into the dust.
Blackburne’s Law theorizes that a portfolio of 8% and 9% first trust deeds will outperform a portfolio of 11% and 12% first trust deeds over a seven-year term. Only our wisest (and eventually the happiest) investors listen to me.
You can also buy some of our smaller deals in their entirety, but I only recommend this if you are richer than Crassus.
It is very easy to lose money in hard money first mortgages, so fight-fight-fight against the temptation to invest in high-yield deals. As Nancy Reagan used to say, “Just say no.” But if you choose 7% to 9% first mortgages, I predict that you will be very, very pleased.
During the S&L Crisis, commercial real estate fell by 45%. Within three years, values reached new highs. During the Dot-Com Meltdown, commercial real estate fell by 45%. Within three years, values reached new highs. During the Great Recession, commercial real estate fell by 45%. Within three years, values reached new highs. Some time in the next decade, we will have another opportunity to snatch up prime commercial real estate at a huge discount. You will be terrified, but when Blackburne and Sons invites you to join a syndicate to buy a nice commercial property at a 35% discount off its prior high, just remember that the best time to invest is when blood is running in the streets. Why not when real estate has fallen by 45%? You’ll never catch the very bottom because historically the bounces off the bottom happen much too fast. Bounce-soar. You will be terrified, but just remember that the best time to invest is when blood is running in the streets.

Blackburne & Sons Realty Capital Corporation--For more information, contact George Blackburne, IV
555 University Ave, Suite 150, Sacramento, CA 95825
Telephone: (916) 338-3232 * Fax: (916) 338-2328
Real Estate Broker -- California Department of Real Estate -- License Number 829677
Publicly advertised to California residents only under California Department of Corporations business plan permit.
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