Flipping homes has become a popular and lucrative investment for individuals across the country. While many people purchase cheaper homes to flip and sell, flipping luxury homes has been growing in popularity. In order to be successful in this branch of real estate investment, it’s critical to consider the following obstacles that are unique to flipping luxury homes. Read more
The Best Hard Money Lenders and How To Get a Hard Money Loan
Hard money loans are a kind of financing for real estate investors. The lenders of hard money loans are not banks. Instead, they are private companies or private individuals that lend the money. The real estate property that is to be purchased is put up as collateral. Hard money loans are easier for borrowers and faster to attain than loans from banks. At the same time, the interest rate is typically higher due to the risk of the lender.
The ABC’s of Hard Money Loans
Hard money loans can be approved within days. The term of the loan is generally several months to several years. Unlike a bank loan, the lenders of a hard money loan are less concerned with the financial history and credit score of the borrower. The focus is on the value of the property. And if the borrower defaults on the loan, the hard money lender will simply cease the property and sell it to get their money back. Borrowers of a hard money loan make regular payments with fees and interest. Reimbursement for any rehab costs must also be paid back.
Some hard money lenders will request a down payment ranging from 20 to 30 percent. Putting a down payment down will likely reduce garner more favorable interest rates and terms. However, other hard money lenders will finance the entire cost of the real estate property. The interest on hard money loans ranges from 8 to 15 percent. There is usually a loan origination fee, too. That fee can range from 1 to 10 percent.
How to Find a Hard Money Lender
Finding a good hard money lender requires due diligence due to the fact that there may be some unrealistic balloon payments or excessive fees. It’s wise to do some intense research to avoid predatory practices. Focus on these four factors:
• Speed of Approval
• Renovation Costs
It’s important to choose a hard money lender with a solid and good reputation. Look for feedback from local real estate chapters like the National Real Estate Investor Association, forum sites for real estate investors, realtors, mortgage providers and title companies. An online search for rankings and reviews can also be done. Be sure to check the prospective hard money lender for proper licensing. The best ones can be found in the Nationwide Multistate Licensing System and Registry. Check for complaints with licensing boards.
A good hard money lender will lend money and approve it quickly. There’s no lengthy application and the process should be very straightforward. Choose a hard money lender who’s not going to make you jump through hoops. It should be short and sweet.
It’s important to shop interest rates and know the structure of the loan. Interest rates should not go over 15 percent. Origination points should not go over 10. It must be a loan that you can afford. Most of the costs with a hard money loan are determined by loan-to-value (LTV) ratio. The loan amount is divided by the value of the property to determine fees and interest rates. Keep in mind that some hard money lenders determine the LTV by after-repair-value, and others calculate using the property’s current appraisal.
Often, the project of a hard money borrower will entail costs for rehabilitation of the property. The hard money loan will need to cover any rehab costs. The monies for rehab in a hard money loan are disbursed in increments. A good hard money lender will map out the payment schedule with you. Once the rehab work has been done and inspected by the hard money lender, more monies are given to complete the project. Rehab costs typically entail roofing, piping and electrical work.
California Hard Money Lenders
There are a number of good hard money lenders in California. Patch of Land, Finance of America, RCN Capital and Visio Lending provide hard money loans on a national basis, including California.
Specifically, Patch of Land is a real estate crowdfunding website that assists in connecting lenders and borrowers. It is well-known for its ease of application, low interest rates and expedience in funding. This company also had a good reputation for walking applicants through the process and responding to any questions the borrower may have.
RCN Capital provides hard money loans for multi-unit dwelling, mixed-use properties and single-family homes. It provides fix and flip financing for real estate investors. And instead of charging interest on the loan amount, RCN Capital charges interest on only the outstanding balance. For those to pay the loan back quickly, there’s no early repayment penalty. RNC Capital is well-known as a more customer-focused hard money lender.
Finance of America is for seasoned flippers and will provide up to a whopping $10 million. In addition, they offer competitive interest rates for both commercial and residential properties. Finance of America has the ability to work on multiple properties and larger projects, so there’s no need for a cash-out refinance. This hard money lender looks for the past track record of hard money borrowers.
Visio Lending offers bridge loans and long-term lending options for rental properties. It’s ideal for those seeking to invest in multi-unit dwelling or vacation properties. They don’t qualify folks on credit score or personal income. This works well for those who are new to real estate investing. Visio Lending will tailor your hard money loan for permanent rentals, transitional rentals and vacation rentals. They offer common sense underwriting for your rentals and are fast and professional.
The North Coast Financial in California is one of the smaller hard money lenders in California that offers hard money loans to regional investors. This hard money lender has over 30 years in experience in lending money to real estate investors for a variety of real estate projects, including land, commercial, multi-family residential and single family residential. North Coast Financial is one of the California hard money lenders that offers flexible lending criteria, fast approvals, competitive rates and great service. Money can be funded within five days. North Coast Financial provides hard money loads in Central California, Northern California and Southern California. They focus on areas like Sacramento, Orange County, Los Angeles, San Diego, San Francisco, Bay Area and Ventura. Plus, they have a long-standing reputation for professionalism and honesty. North Coast Financial in California can be easily contacted for a free consultation.
Hard money loans are the ideal solution when you want to get a short-term loan with a poor credit score, fix and flip and investment property, rehab a home, get a loan with no down payment or switch to a traditional mortgage soon. Hard money loans give you the money you need fast to take advantage of a good deal. Rehab a home for sale to avoid foreclosure with a hard money loan. Hard money loans also allow investors to get their real estate business off the ground. Pay back your hard money loan on time, and the lender will be there for you when you’re ready for your next deal. It’s all about building a solid partnership with hard money lenders.
California is a great state for real estate investors with its great weather, beaches, population and real estate opportunities, and there are many California hard money lenders available that are very reputable. All around, there are many benefits to using California hard money lenders for real estate investors. Just be sure to vet your lender, read the fine print, complete your due diligence before jumping into any deal. While hard money loans can be risky, these types of loans are a big upside for real estate investors. With the right properties and proper financial planning, you can make a lot of money as a real estate investor. And the hard money lenders in California are there to help you succeed every step of the way.
California real estate offers plenty of opportunity for savvy investors. According to Zillow, a real estate website, home values have jumped by 6.9 percent over the course of the past year. This means that anyone looking to make money with real estate in California needs the right assets in order to move forward with the deal.
This is where hard money funding for California real estate investment comes into play. Hard money loans have become an excellent alternative to traditional financing for home buyers, especially those who are interested in flipping homes.
There are a number of benefits that hard money funding has over traditional financing. Gaining a working understanding of hard money and how it works in the California housing market will be helpful in forming a real estate investment strategy. You’ll also need to know some of the downfalls of hard money lending, such as higher interest rates and shorter terms, combined with higher down payments. It’s up to you to make sure the benefits outweigh the drawbacks of hard money funding.
An Intro to Hard Money Lending in California
Hard money funding refers to any type of funding that comes through private individuals or organizations. Typically, in California, hard money lenders are a group of investors or private entities that provide capital for those interested in buying real estate. For example, we offer hard money funding for borrowers interested in fixing and flipping properties.
A hard money loan is generally secured by the real estate itself. When applying for hard money financing, your credit score certainly comes into play, but so does the condition and attributes of the property in question. When it comes to a fix and flip property, the lender is usually equally as concerned with the after-repair value as it is with the credit score of the borrower.
As an overall rule, a hard money lender in California will fund approximately 80 percent of the property, leaving you with the responsibility of funding the remaining 20 percent from another source of financing.
You’ll also need to know that California hard money lenders generally only operate within a specific geographic region. This means that the interest rates that you’ll have for a hard money loan will be different based on the location of the desired property.
The interest rates are typically higher for a hard money loan than a traditional bank loan. The main advantage of a hard money loan is the speed at which the funding can be provided, allowing you to swoop in on an ideal property. A hard money loan can be received in as little as a week, which can be compared to the several weeks or several months of a traditional loan.
The Top California Hard Money Lending Markets
As we discussed above, different hard money lenders operate in different regions. Below are the top regions in California for hard money lenders. Gaining an understanding of these markets will help you make your decision about which market you’d like to pursue your hard money loan within.
Sacramento is one of the most promising real estate sectors thanks to a bustling economy and reasonably priced homes. According to Zillow, home prices have grown by 11.3 percent in the past year.
While you won’t find a lot of competition for hard money loans in Sacramento, there are still plenty of hard money funding option available in this market.
2. Los Angeles
With more than a dozen or more hard money lenders in Los Angeles, there are plenty of options for people seeking a hard money loan. Interests rates tend to fall between 7 and 11 percent for hard money loans in Los Angeles.
The median sale price of a home in L.A. has grown by 5.6 percent over the course of the past year, meaning there’s plenty of room to make money by flipping houses in L.A.
3. Orange County
Orange County has plenty of inventory available, and there’s competition among hard money lenders to finance home purchases. Loan rates in Orange County often fall between 7 and 10 percent, which is much lower than the California average.
Additionally, Orange County homes saw a 5.7 percent increase in the median sales price between 2016 and 2017. It’s a growing area with plenty of opportunity.
4. San Diego
San Diego’s housing market is growing by leaps and bounds, with the average home value surpassing $555,000. With a median list price of $625,000, home sales have seen an increase of 6.8%. There are several hard money lenders that operate in this area, creating healthy competition for buyers.
5. San Francisco
Much like Orange County, there is competition among hard money lenders to finance home purchases in San Francisco. This results in interest rates being much lower than the average, falling around 7 to 9 percent. Your individual interest rate will depend on the property’s location, your credit and the profitability of the property.
The median home value in San Francisco is $1.14 million. During the year of 2016, the average profit per flip was an astonishing $140,000.
Weigh Your Options Carefully
Take time to consider your options carefully before pursuing a hard money loan or a traditional loan. Keep in mind the risks and rewards of each type of loan, as well as how important speed is in your situation. If you need funding right away to secure your ideal property, hard money funding in California may be exactly what you need.
What is a hard money lender? And why is it that many of them prefer to go by a more friendly-sounding monitor — private lender? It is most likely because when people hear the phrase hard money lender, they automatically assume a person is talking about a loan shark. What needs to be realized, though, is that hard money lending is not bad. In fact, it can be a very reliable source of funding for people who are looking to make fix-and-flip investments.
Reasons you can take advantage of a hard money lender
The following circumstances are examples of instances in which you can take advantage of a hard money lender:
- A property is identified that you must purchase in a very short amount of time in order for you to make a good profit on the investment you make.
- You are interested in buying a piece of property that requires extensive rehabbing but you do not want to pay for the rehab out of your own pocket.
- You are unable to secure funding through a traditional banking institution.
- You want to take advantage of a short and simple loan application process.
- You need quick access to money.
You have probably heard a few things about hard money lenders before, and these things may not have been good. What you need to realize, however, is that these lenders are just as interested in making money and making sound investments as you are. They want everyone involved in the loan process to be satisfied, including the borrower. When you choose a hard money lender, you should make sure you are borrowing from an entity that provides you with a constant supply of financing as you never know when you will need to access funds for the fix-and-flips you are investing in.
The Benefits of Hard Money Lenders
As you can see already, hard money lenders bring many benefits to the funding table. Let’s take a quick look at a list of these benefits:
- You don’t need to meet a long list of requirements to qualify for financing.
- You can take advantage of asset-based lending.
- More collateral options than you will find through traditional banks.
- Hard money lenders understand the importance of making repairs to your fix-and-flip properties.
- Lower down payments than you will have to pay to secure funding through a traditional bank.
- Faster loan approval.
- Quick access to funds.
- The application process is very simple.
- No hidden fees.
- Reasonable and affordable loan rates.
- Rehab properties can take advantage of short-term bridge loans.
- Repayment options are very flexible.
A hard money lender shares the same vision you have in regards to the investments you are making. They have an extensive amount of knowledge relating to fix-and-flip investments, which is why they are so eager to lend money to help you fix up the properties you buy. They are more apt to lend money because they lend funds based on the after-value of a property rather than the current-value. They take into account what the property will be worth once the repairs and remodeling have been completed.
Knowing How to Choose a Hard Money Lender
As you can imagine, all of the benefits brought to you by a hard money lender can only be accessed if you partner with a lender that is reliable and reputable. This is why it is so important to choose a lender that has a good reputation and that you deem as trustworthy. To help you assess the reputation and trustworthiness of a lender, you should ask yourself the following questions:
- Is the hard money lender licensed?
- Is the hard money lender bonded?
- Does the lender have extensive knowledge relating to the real estate area in which you are wanting to purchase property?
- Does the lender have references you can contact?
- Does the lender make it simple to understand any listing fees?
- Does the lender offer flexible repayment options?
If you are looking to invest in a fix-and-flip, you need to make sure that you consider all of your financing options, including hard money lending. You may have heard bad things about this lending practice in the past, but truth is, it is a very reliable source of funding that can provide you quick access to the money you need to make the most money out of your next investment.
Have you ever heard of Hard Money Lenders in California? What does this type of lender do and when in life would a person need to take advantage of this type of lender? These are the questions we are going to answer, so keep reading to find out whether a hard money lender can be the solution to your unique mortgage situation.
What Is a Hard Money Lender?
A lender is considered a hard money lender when it lends money outside of a traditional bank or credit union. Hard money lenders are known to lend money to individuals as well as businesses.
In some instances, hard money loans are referred to as bridge loans. Bridge loans are short-term loans that are many times used by investors, particularly those in the real estate industry. The funds accessed through bridge loans are generally used by real estate investors to flip homes and renovate properties. The funds themselves are typically provided by investment groups or private lenders.
A person or entity who wants to access funds through a hard money lender will need to provide equity in order to qualify. This is because most hard money lenders base an entity’s qualification status on equity rather than a credit score. In fact, because of this, you may have heard of hard money loans being referred to as equity-based loans. With hard money loans, you won’t have to fill out a bunch of paperwork and provide all types of documentation to prove you have good credit. Instead, you simply put down a large down payment to offset the lender’s risk in loaning you money.
If, however, you do want to use your credit to secure funds through a hard money lender, then you should make this known when you start applying for funds. Let the lender know you are willing to provide documentation of good credit to try and lower your interest rate on the borrowed funds. Some hard money lenders will provide a reduced interest rate for those with really good credit. If you can’t find a hard money lender willing to provide a reduced rate for good credit, then you may find a traditional lending route to be more appealing. A conventional lender will without a doubt almost always be able to provide the lowest interest rate possible on a mortgage.
Why Should You Get a Hard Money Loan?
If you don’t qualify for a conventional mortgage loan through a bank or credit union, then a hard money loan may be the only way for you to get a mortgage. On the upside, a hard money loan gives you access to funds much faster than a conventional loan. Hard money loans are usually processed and available within only a few weeks or days. A conventional mortgage can take months to get approved for and access to funds.
The following is a list of borrowers who tend to access funds through hard money loans:
Do you buy homes, renovate them, and then flip them for a profit? Or is this something you think you might be interested in? Either way, you will need funds to perform property purchases and renovations. Unfortunately, a lot of conventional lenders won’t provide funds for flipping properties. However, hard money lenders especially like lending to property flippers because they know they will get their money back as soon as the property is flipped (as long as a profit is made). It’s a win-win for everyone. Property flippers get fast access to cash to perform renovations while the lenders know the property will be flipped as fast as possible, meaning they get their funds back fast too.
Can’t Qualify for Traditional Loan
There are numerous reasons as to why you may not qualify for a traditional mortgage loan. Take for example you are going through a divorce. Your credit score is good but the divorce is holding up things when it comes to accessing funds through a traditional loan. With a hard money lender, you don’t have to fret about the divorce. Instead, you can explain your situation and mention the equity you have to work with. This will help the hard money lender understand how much you want to borrow and whether you have sufficient equity to back up the loan.
Homeowners Facing Foreclosure With Lots of Equity
If you’re facing foreclosure but have lots of equity and want to keep your home, then you should definitely speak with a hard money lender. However, keep in mind that the only way a hard money lender will want to work with you is if they can:
Are you considering applying for a hard money loan? We hope the information we provided above helps you have a better understanding of how these loans work and who most commonly takes advantage of them. Most hard money lenders provide flexible repayment terms, but most importantly, they give you fast access to cash, making it simple to get your hands on the money you need when you need it. Just remember, you don’t need a top-notch credit score to get funds through a hard money loan. Instead, you simply need equity, or in some instances, some form of substantial collateral. These loans are meant to serve as a short-term form of funding, so don’t approach or use them as a long-term form of getting your hands of cash. When used correctly, California Hard Money Lenders can help you make and save money.
What do you think of when you hear the words “hard money loan?” Do you envision shady characters conducting business in dark alleys and charging exorbitant interest rates? While a few bad apples have cast a shadow on some hard money lenders, if you do your due diligence, you shouldn’t have to worry about being taken advantage of. And believe it or not, there are reputable hard money lenders out there.
The Basics of a Hard Money Loan
A hard money loan is a short-term loan backed up by real estate. Generally, they are funded by private investors instead of banks. Terms are typically 12 months but can be extended to 5 years. Monthly payments consist of some principal and interest with a balloon payment at the end. The amount of hard money given is dependent on the value of the property. Most hard money lenders are concerned with the property’s value rather than the borrower’s credit. When a bank says “no,” a hard money lender says “yes.” Hard money loans come in handy when banks are not an option or the loan is needed for just a short time. They are ideal for land loans, flips and when a buyer has credit issues or when the borrower needs to act quickly. Hard money loans only take a day or two for approval compared to the typical 45-day wait with a bank.
3 Things to Investigate
When you’re looking at different California hard money lenders, there are three things to keep in mind.
First, take a look at the interest rates and points of the loan. The good news is that hard money lenders the El Dorado state of California tend have lower rates than in other regions in the nation. And that’s because there are so many of them in California. California hard money lenders have to duke it out with each other in order to get your business.
One thing to note is that hard money lenders do take on more risk than banks. Hence, there will be higher interest and points compared to a bank. The interest rate should range between 10 to 15 % and points should range from 2 to 4%. These ranges depend on the loan to ratio value.
This is why the second thing you need to do is take a good look at the hard money loan to ratio value (LTV). “The loan amount is determined by the ratio of loan amount divided by the property’s value.” You can expect a hard money lender to lend up to 75% of the property’s value. California hard money loans will be based on the value of the property after improvements. But then, you can expect the interest rate to be higher.
Knowing what the hard money lender requires for the loan is the third factor that you need to look at. As mentioned previously, most hard money lenders are not that concerned about the borrower’s credit. If you have the capital to pay the interest on the loan, previously problems such as foreclosure may be overlooked. The hard money lender will also want to know your plan for the property, so be prepared to have one in place. The plan should outline how you intend to pay off the loan.
Many people have likely seen or at least heard of reality television shows that follow the journey of real estate investors who purchase a property that requires some tender loving care and carefully transform it into something they can sell for a significant amount more than what they spent on it. This is also called flipping a property.
One of the latest trends in real estate investing is flipping houses. More people are buying homes that are selling for a low price to make renovations and changes that can boost the value of the home, quickly turning the home around for a profit. Unfortunately, it is possible to do house flipping incorrectly, which can end up costing you more money than you make.
Investing in commercial real estate is a different experience than investing in residential real estate. However, just like any other type of real estate investing, it’s essential to find the right lenders to get you the funding you need. While traditional loans are always an option, they aren’t the easiest for all individuals to obtain, and they can take a much longer amount of time to be approved.
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