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.

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.

Real estate investing has grown by leaps and bounds over the years. Gone are the days when you had to hope you could qualify for traditional bank loans or had to have the right amount of money to purchase properties for cash in order to make the most out of your real estate investments. Today, there are many options that allow more individuals to create a secure financial future through real estate investing. For instance, hard money lending can be a great way to get the funding you need to purchase properties and either rent them out or flip them for a profit.

A Growing Real Estate Investment Trend

In recent years, the trend toward investing in real estate has rapidly expanded. These investments are no longer only undertaken by those who have experience in the real estate market or who wish to have a passive form of income. More individuals are choosing these forms of investments as a way to help pad their financial future, particularly as they move toward retirement, and as a good source of income that has promises of positive returns. However, the increase in the number of people interested in real estate investment has created a greater need for funding options. Banks and other traditional mortgage lenders often have stringent requirements that need to be met, especially when it comes to investment property. These requirements can make it difficult for the average person to qualify for the loans they need to invest. In addition, these loans can take a long time to be approved, which can cause investors to either miss out on a property they’re interested in or delay their income potential. When these individuals turn to private hard money lenders in California, there are fewer requirements and the process is fast and relatively easy. This means investors can get started more quickly and increase their profits and property turnaround.

Flipping Is a Hot Trend

While there are still many people who are interested in buying either single or multi-family properties with the intent of renting those properties out for a steady source of income, there are more individuals who are looking for a different way to invest in real estate. The house flipping business is one of the fastest growing forms of real estate investing. During this process, individuals purchase homes that either require a lot of work to get them into a good condition or can benefit from some renovations to enhance the value. They then make changes to the home, upgrading features and fixing problems, so they can turn around and sell the home for a higher price, creating a profit. However, this type of investing can be difficult when you use traditional lending avenues. This is because a bank or other traditional mortgage lender is much more likely to only cover the cost of purchasing the home, which can leave flippers looking for ways to fund the renovations they want to do to increase the value of the home. This isn’t usually a problem with California hard money lenders. These lenders are looking for good investment opportunities and often see the true value potential of a home. This means they are more likely to also foot the bill for the renovations, so they can have a share of the profits when the property does sell for a higher price.

Don’t Go Into It Alone

Even with the availability of California hard money lenders, it can be daunting to try to find one to work with by yourself. Just like not all financial institutions are built the same, not all hard money lenders in California go into the business with honest intentions or even a realistic view of what is possible. This can make it difficult to determine who you can trust and how you can get the money you need with the least amount of risk possible. The good news is you don’t have to go through this process entirely on your own. When you work with a company like Barrett Financial Group, you can rest assured you have someone in your corner who also has your best interests at heart. These professionals can help you weed through the daunting list of hard money lenders in California and determine which ones would be the best option to work by your side to realize your dreams of lucrative real estate investing.

Tools and Resources For Your Success

Working with a lender who is more hands-off can seem like a dream come true for those who are just starting out in the real estate investment world. Unfortunately, this can be a serious mistake, especially if you aren’t familiar with real estate investing or even hard money lending in general. In fact, in this business, having a lender who offers the tools and resources you need to succeed increases your chances of successful real estate transactions, regardless of whether you’re purchasing property to rent out or you want to flip the property and sell it for a profit. In fact, there are several key things you should look for as you shop around for California hard money lenders, such as:

• A focus that aligns with your overall goals for your real estate investing
• A high level of responsiveness
• Reasonable fees and interest rates that help keep your real estate investing within your budget
• The right types of loans

In addition, it’s best to work with hard money lenders in California who are ready to answer questions and help you find the resources you need, so you can be successful and make money for both of you. The right support can go a long way toward ensuring you make money on your investments. When you get involved with the hard money lending sector, it’s not just about you and your profits. The lenders also want to see you make the highest profit possible to increase their share in the revenue. This is why they should be willing and even eager to help you any way they can.

Fast Turnarounds

Especially if you’re interested in the house flipping aspect of real estate investing, you understand how critical a fast turnaround can be when it comes to real estate. Every month you aren’t able to sell a home is another mortgage payment that needs to be made or more fees you must pay. However, it’s not just about being able to sell the home fast, so you can repay the loan or move on to the next property. You want to work with hard money lenders in California who make the process of getting approved for a loan as fast and easy as possible. With the help of a company like Barrett Financial Group, you should be able to easily apply for the funding you need for your next project and get your approval as quickly as possible, often in as little as 24 hours. When you do get an offer from a company, you need to be able to easily understand the terms so there are no surprises when it comes time to make a payment or to pay off the loan in full.

Check Rates and Ratings

Finally, before you settle on any California hard money lenders, it’s essential to check a few more things. For instance, the rate a hard money lender charges is essential. While these rates can typically be a little higher than traditional loans, there is slightly more risk involved and there is often less money available. However, the rates shouldn’t be incredibly high either. In addition to the rates they offer, it’s also essential to check into the ratings of the lender you choose to work with. Even hard money lenders in California are likely to have a reputation with the Better Business Bureau, as well as reviews left on various sites. This information will help you make the most informed decision and help you get the most out of your real estate investments.

If you’re interested in real estate investments and are looking for California hard money lenders with a positive reputation for helping their investors get the most for their money, Barrett Financial Group can provide the solutions necessary to help you purchase the best properties to get more bang for your buck. Contact us today to discuss your goals and find out how we can help you achieve great things!