Nobody gets into real estate just to “break even.” Any investment that’s worth doing is one that you should be able to earn a profit on in the long run, whether you’re planning on selling the property or renting it out. The good news is that there are a few ways you can up the value of the property without shelling out for expensive renovations or simply wasting time by waiting for overall market prices to rise. Keep reading for four tips you can follow to help your real estate listing increase in appeal inside and out. 

1. Give it a Fresh Coat of Paint

Never underestimate just how much a simple coat of paint can do. Especially if it’s been a while since they were maintained, the walls in your property may be well overdue for some patching and painting. While painting the walls of a home certainly doesn’t take anywhere near as long as renovating it, it’s still important to work slowly and steadily. Make sure you paint even lines and don’t leave behind any drip marks or unwanted stains. Always cover up floors and any furniture that may be exposed. 

If you want to give the home an all-new vibe, then a new color scheme may be in order. That said, be sure to pick out lighter, crowd-pleasing colors in order to lower the risk of turning away some potentially interested buying or renting parties. 

2. Stage It

Whether you’re selling or renting, you can instantly boost the home’s appeal with some tasteful, well-placed decor and furniture. Don’t worry about filling the place; too much will make the property appear cluttered and intimidating. Instead, place neat rugs in rooms without carpeting and consider putting in some curtains. A few statement pieces (like framed art and/or plants in modern vases) can add some color and spark life into the property. 

3. Brighten the Curb Appeal

The first thing anyone sees is what the property looks like from the street. So no matter what you do to vamp up the inside, make sure you are not neglecting the exteriors. Lawns should always be taken care of, meaning regular mowing. Consider designating space for a garden or adding some large potted plants. Trim away any overgrown hedges or trees. Old fencing may need to be replaced or repaired, or in some cases removed entirely. Adding in patio seating or even a grill can be a selling point for many potential new owners or lease residents. 

4. Upgrade the Home Tech

Long gone are the days when the only electronics you needed to woo home buyers were functioning lights and a few kitchen appliances. Many modern home buyers and renters (especially those willing to pay more) are looking for “smart tech” like energy-efficient thermostats, keyless locks, and smartphone-compatible appliances. While you don’t need to go all out, the good news is that home tech is becoming more affordable than ever. Having at least one new system installed on your property will help set the listing apart from others and also give the value and instant boost. 

Most lenders base their decision to extend a loan primarily on your income, credit score and other related factors. California hard money lenders, on the other hand, offer loans secured by collateral. With a hard money loan, you can get the financing you need even if you do not have a high credit score or the other characteristics required to qualify for a traditional loan. 

Even though a hard money loan does not have the same requirements as a more traditional loan, you must still submit a variety of documents before your loan will be approved. Below is some basic information about hard money loans, along with a discussion of the documents you will need when you apply for a hard money loan.

Benefits of Hard Money Loans

Hard money loans offer several benefits over traditional sources of financing. Some of the primary benefits of getting a loan from hard money lenders in California include:

Different Types of Hard Money Loans

Not all hard money loans are the same. The type of hard money loan you apply for will ultimately determine which documents you need to submit. Most hard money loans can be classified as one of two types: Consumer loans or non-consumer loans. 

A consumer loan is a loan in which the funds will be used for household, family or personal purposes. A non-consumer loan is a loan in which the funds are used for a purpose that does not fall into one of these categories. Keep in mind that the classification of the loan is based solely on the use of the funds. The type of property you use to secure the loan has no effect on its classification. 

The documentation requirements are least cumbersome for non-consumer loans. Consumer loans will require a greater amount of documentation. If you are seeking a consumer owner-occupied loan, the documentation requirements will increase even more. These differences in documentation are related to the federal regulations that apply to all consumer loans, even those offered by California hard money lenders. Because of these differences, obtaining a non-consumer hard money loan is typically much easier and faster that obtaining a consumer loan, especially when you plan to occupy the property used as collateral.

Documentation Requirements for Both Consumer and Non-Consumer Loans

Below are the documents and disclosures that must be completed and filed regardless of whether you are seeking a consumer loan or a non-consumer loan. 

1. Application

In the majority of cases, the first document you will need to submit to obtain a hard money loan is the initial application. This application may ask you to supply information about your loan’s purpose, the collateral, your income and more. The level of detail required on a hard money loan application can vary considerably by lender. The specifics of your loan may also determine the level of detail required on this first piece of paperwork. 

2. Privacy Policy

Hard money lenders typically provide you with a document that explains how they will use the personal and financial information you have supplied. 

3. Equal Credit Opportunity Act Notice

Under federal law, lenders are not allowed to discriminate against borrowers based on certain characteristics, including age, marital status, sex, religion, race and more. Lenders must provide a notice of these requirements to borrowers under the Consumer Credit Protection Act. 

4. Mortgage Loan Disclosure Statement

The Mortgage Loan Disclosure Statement provides you with specific information about the terms of the loan you are seeking, as well as the costs and fees you will pay to obtain it. 

5. Fair Lending Notice

Similar to the Equal Credit Opportunity Act Notice, the Fair Lending Notice is a disclosure required by federal law that states the lender’s obligation to avoid certain discriminatory practices.

6. Hazard Insurance Disclosure

The Hazard Insurance Disclosure describes your rights and responsibilities with regard to maintaining insurance coverage on the real estate that secures your loan. 

7. Deed of Trust

The deed of trust is a document that is designed to bring in a third party to ensure that both you and the lender uphold your responsibilities as determined by the loan agreement. This document will designate the identity of this third party, who will be responsible for holding the property deed until the terms of the loan have been fulfilled. After you have paid the loan in full, this trustee will relinquish the property deed to you.

8. Escrow Instructions

The escrow instructions are detailed, written requirements imposed on the escrow company. This document describes each of the conditions that must be met before the loan escrow can be officially closed. 

9. Promissory Note

The promissory note is one of the most important documents that must be completed during this process. When you sign this document, you are promising to make specific loan payments on specific dates until the loan is paid in full. The promissory note will also list rules the trustee must follow in order to ensure all parts of this agreement are satisfied. 

Additional Documents Required for Consumer Loans

As mentioned above, consumer loans require more extensive documentation than non-consumer loans. If you are applying for a consumer hard money loan, some of the additional documents you may need to submit to the lender before your loan can be approved include:

1. Documents to prove your income

In many cases, you will need to provide substantial proof of your income before you can qualify for a consumer hard money loan. The purpose of these documents is to provide the lender with reassurance that you will be able to make the required payments. Some of the proof of income documents California hard money lenders may accept includebank statements, pay stubs, tax returns and W2s. In most cases, these documents will need to be recent. You may also need to provide more than one of each document requested. For example, the lender may ask for tax returns from the past two years or pay stubs from several recent pay periods.

2. Documents to prove assets

If you are making a downpayment, or if the lender has a requirement related to financial reserves, you may need to provide documents that prove you are in possession of sufficient liquid assets. For most borrowers, this will simply involve submitting copies of your most recent bank statements.

3. Documents related to debts

Many hard money lenders considering an application for a consumer loan will ask for documentation related to your other revolving debts and expenses. The purpose of this documentation is to allow the lender to verify that you will be able to make the required loan payments without raising your debt-to-income ratio above a certain level. Most lenders will simply use the information contained on your credit report. However, if any of this information is inaccurate, or if you will be repaying debts listed on your credit report prior to closing in order to qualify, you may need to provide additional documentation.

4. Loan estimate

Under the Dodd-Frank Act, lenders of consumer loans are now required to prepare a loan estimate for borrowers. This document will give you specific information about all the costs associated with your loan, including your monthly payment, interest rates and more.

5. Closing disclosure

The closing disclosure is similar to the Loan Estimate. However, this document includes other information about the loan, such as its disbursement date and the date of closing.

Consumer Owner-Occupied Loan Requirements

If you are applying for a consumer owner-occupied loan, even more documents will be required in addition to the ones listed above. Some of these documents may include:

1. Oral Disclosure

After going over all of the terms of the loan, many hard money lenders require borrowers to complete an oral disclosure confirming that they understand all of the loan’s terms and their responsibilities.

2. Right of Rescission

With a consumer owner-occupied loan, the loan in question is likely going to be secured by your primary residence. This means that the lender is required to provide you with a three-day Right of Rescission by law. During this time, you have the right to cancel the loan. The Right of Rescission period begins after you have signed the loan documents.

3. Homeownership Counseling

Before the loan can be completed, a homeownership counseling certificate must be obtained. This document discloses the requirements related to this certificate.

4. HOEPA Disclosure

The Home Ownership Equity Protection Act requires California hard money lenders to include a HOEPA Disclosure if the fees and interest rate associated with the loan are above a specific threshold. This document will disclose the loans Annual Percentage Rate, or APR.

Hard Money Lenders California

Buying homes and fixing them up to sell, otherwise known as flipping homes, has rapidly grown in popularity, especially in high-demand urban areas. With the purchase of the right property, individuals can upgrade and fix homes and then sell them for a profit. However, it has to be done correctly in order to generate the returns individuals are looking for. The following will help you take advantage of this type of opportunity.

What You Should Look For

Just because a property is cheap doesn’t make it a great opportunity for flipping. The last thing you want is to buy a property in a bad area or one that requires more work that will affect whether you can actually make a profit. To prevent this issue, you need to look for properties with no major structural damage that are near good schools, have shops and other amenities close by and are easily accessible, both by private vehicle and public transportation. Sometimes these properties are located close to high-demand areas where individuals may be looking to move.

Start with a Plan

It’s always important to go into your fix and flip project with a general plan of what needs to be done. This will allow you to properly budget for the renovations that need to be done, as well as determine the selling price you need to reach in order to make a profit. Do your research to find out what buyers in the area are looking for in terms of features so you can be sure to create an appealing home that is more likely to sell quickly. However, it’s also important to stick within your set budget and have realistic expectations about the end results you may achieve.

Get the Right Financing

One of the most difficult parts about purchasing homes to flip is getting the right financing. Not only will you need money to pay for the property, but you will also need to finance the renovations you will need to complete before you can resell. If you aren’t able to secure the funds you need before you get started, you may find yourself continuing to pay a mortgage on a home that isn’t finished and you aren’t able to sell. This likely means you will have to work with hard money lenders, rather than obtaining a more traditional home loan through a bank. These lenders are often more flexible than banks and other traditional lenders and don’t need to follow the same rules and regulations. This will allow you to get all the financing you need to complete your project.

Flipping homes can be a lucrative investment if done correctly. When you learn how to take advantage of this type of real estate investment, you can enjoy a steady flow of income and the satisfaction of creating a house people will love to call home.

If you’re interested in throwing your hat into the real estate investment ring, you’ll need some capital to get started. Generally, when you’re first starting out in real estate investment (whether it be residential or commercial), you’ll want to start relatively small. Still, buying a property as an investor often means placing a large down payment—so it’s not uncommon to need thousands or even tens of thousands of dollars to get going.

If you don’t exactly have that kind of money lying around, you may need to raise capital for your first real estate investment. By having a better understanding of how California hard money lenders work and what they’re looking for in an investment, as well as how to convince a money partner to lend to you, you’ll have an easier time getting your start in the real estate game.

Why You Need Investment Capital

Most investment properties will require a minimum of a 20% down payment, regardless of whether you’re looking at a fixer-upper residential home or a commercial property. In some cases, you may even be expected to pay for a property in-full at the time of purchase (though this is most common with auctions).

With this in mind, it’s a lot easier to see why being able to raise investment capital is so important. Specifically, investment capital refers to the money that you’ll borrow and use to pay for your real estate investment. This can include not only the price associated with purchasing the property itself, but any expenses that may go into updating it and/or renovating it as well.

When you’re trying to determine how much investment capital you’ll need, then, there are a few things to keep in mind. In addition to the list price on the property itself, you’ll also need to factor in closing costs and other expenses that go into closing on a residential or commercial property. This can include title fees, inspection costs, and appraisals as well. In many transactions, this can easily add up to thousands of dollars.

If your investment property will need work, you’ll also need to do a fair amount of research to figure out an approximate figure for your renovations and remodeling. When you add all these costs together (and subtract any money you may be bringing to the table personally), you’ll be able to figure out how much investment capital you need to raise.

Using debt investment capital as opposed to equity capital is where most new real estate investors start out; this means you’ll most likely be turning to banks and other hard money lenders in California to secure the money you need. The banks or individuals you end up receiving funding from are known as money partners. Keep in mind that depending on the size of your proposed investment, it’s not entirely uncommon to work with multiple money partners on a given deal.

Tips for Raising Money as a New Investor

Getting into the real estate investment game can be challenging. Some lenders may not want to work with you because you don’t have experience—but how are you supposed to gain experience if nobody will lend you money? The key is knowing what today’s money partners are looking for in a sound real estate investment and being able to deliver that to them.

As you prepare to approach California hard money lenders, there are a few tips worth keeping in mind that may increase your chances of being able to secure that first investment.

Use Some of Your Own Funds

While this may not be a realistic option for all beginning investors, it’s always a good idea to have a little of your own cash in the game. Doing so will force you to put more thought into where that money is being spent. It will also encourage you to be a little more careful about your spending. This is especially true if you’ll be doing any major renovations or other projects; taking the time to shop around for competing bids and estimates may save you a decent chunk of change.

Your investors may also like knowing that you’re using some of your own capital on any given project. This shows them that you’re confident enough in your plans to put your own money on the line, which can in-turn boost their confidence in your investment.

And of course, there’s always the fact that putting some of your own money into your investment reduces the total amount that you need to borrow. This can make it easier to raise funds while also cutting down on interest payments down the road. The key is deciding on the right amount of your own money to kick in; you don’t want to completely drain your savings account for your first real estate investment, but having at least a small amount of your own money brought in can make a big difference in a lot of ways.

Reach Out to Your Connections

Ask anybody who has been in the real estate game for a while and they’ll tell you that being able to secure funding for your real estate ventures is all about networking. Before you even begin reaching out to hard money lenders, take some time to think about investors you may know personally. If you have any existing relationships with lenders, you may have an easier time securing funding. Even if you don’t know any investors personally, talking to one of your connections could send you in the right direction of somebody who may be interested in funding your project.

Another solid tip to keep in mind when it comes to meeting new potential investors is to find out when local real estate clubs are holding meetings and attend those meetings in our area. These events not only provide a great opportunity to meet some new investors and network with others in the world of real estate investing—but they sometimes offer free training courses as well.

Be Realistic About Returns

At the end of the day, it doesn’t matter if you’re working with a private lender (such as a California hard money lender) or a personal connection. There’s one thing that everybody wants when they lend you money for a real estate investment: returns. When somebody lends you money for a residential or commercial real estate investment, they’re trusting you to protect their capital and deliver on the return that you promised.

With this in mind, it’s important to be realistic about what you can and cannot deliver. Calculating returns, especially when you’re first getting started in the real estate investment game, can be a challenge. It’s always better to air on the side of being cautious with your promises to investors than to over-promise and under-deliver. From there, if you end up delivering more than what you promised, all that’s going to do is create a stronger bond and sense of trust between you and the investor for potential future projects.

If you’re not feeling totally confident about crunching the numbers for your first real estate investment, there are plenty of free resourcesthat can be useful.

Build Your Reputation

Hard money lenders will be more likely to invest if they know who you are and see you as a reputable figure in the real estate industry. This is where things can get tricky because if you’re looking for investors, you’re probably pretty new to real estate investing in the first place. Still, there are plenty of ways to build your reputation and make yourself more of an authority in the field without having a lot of hands-on experience.

This is where it can be especially useful to familiarize yourself with the world of private lending and look for ways to more-or-less become an educator on the subject. From there, you can write blogs, hold free classes, or take other steps to establish yourself as an authority figure. As your name and reputation grows, so will your chances of being able to secure your own real estate funding with investors who are familiar with you.

Focus on Building Relationships

One of the most difficult pieces of advice for many new real estate investors to follow is to focus on building relationships with others—even if they don’t necessarily have any interest in investing in your next project. You never know when you may have an opportunity spring up that they will be interested in, so you never want to write somebody off simply because they’re not a good fit for your current goals.

Remember, successful real estate investing (and fund-raising) is all about who you know. Building relationships with others in the field and maintaining them will always help you grow—even if you may not reap any immediate benefits.

Don’t Forget to Document

Being detail-oriented is one of the best characteristics you can have as a real estate investor. You’ll want to have documentation of everything you do related to any given real estate deal. This includes write-ups for how you calculated potential returns on investment, as well as proposed purchase prices, renovation costs, and any other details related to a purchase.

A hard money lender will not only appreciate this documentation, but many will actually require it. And of course, having everything documented can help you out in the long run by allowing you to reflect on your investments down the road. If mistakes were made, your documentation will make it easier to go back and determine when and how those mistakes occurred so you can prevent them in your next investment.

Show Off What You’ve Done

Last but not least, keep in mind that it never hurts to have a portfolio and do a little “showing off” of successful investments you may have taken on in the past. Even if you’ve never been involved in a real estate investment before, having proof of other investments or similar ventures can be useful when you’re pitching to a lender for the first time. 

As you gain more experience with real estate investing, it’s a good idea to build a portfolio and/or website. Don’t be ashamed to talk about your success. The key is to just be mindful that you’re not coming off as “braggy,” as this could be a turn-off to some potential investors. When investors are able to see your past successes, they may feel more confident funding your projects.

The Bottom Line

Securing funding for your first residential or commercial real estate investment isn’t going to be easy—but a little bit of preparation can go a long way. By having a solid understanding of how the world of private money lending works and what these lenders are looking for in an investment pitch, you can move forward with confidence. From there, you can secure the financing you need (less any of your own money that you may be putting into the project) and embark on your real estate investment journey.

Home Construction Plans and Small Scale Model of Home on a Table

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:

• Reputation
• Speed of Approval
• Affordability
• 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.

House on Packs of Banknotes

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.

1. Sacramento

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?

The Takeaway

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:

Property Flippers

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:

Final Thoughts

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.

California Hard Money Lender Meeting with Clients

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.