Choosing The Best California Lender for Your Commercial Real Estate Project
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. Therefore, it is often in your best interest to consider hard money lenders in California to help you get the funding you need to get started in commercial real estate investing and keep it going. The following guide will help you choose the right lender to meet your needs.
What Is a Hard Money Loan?
Most individuals are familiar with traditional loans and how they work. In these situations, you must apply to a bank and provide proof that you are able to make the necessary payments, as well as provide the proper collateral to ensure the bank feels confident they will receive their money back one way or another. This can make it extremely difficult for those who wish to get started in commercial real estate, especially those who don’t have a lot of their own capital to work with. However, when it comes to working with California hard money lenders instead, you will have a much different experience. These lenders are typically individuals who are also interested in investing in real estate in a more passive role or private entities with similar interests. These types of loans often require less paperwork and can be approved more quickly with less hassle than dealing with a bank. It’s up to the individual or the entity to decide whether it’s worth the risk. It works more like a partnership than the traditional loans you would receive from a bank.
What Terms Are Common?
Just like traditional loans, hard money lenders in California will have specific terms that need to be followed in order to approve the loan. However, the typical terms used vary somewhat from the ones traditional lenders typically offer. For instance, they are often approved with a much lower loan to value ratio than a bank would require to approve a loan. Many hard money loans are approved with a LTV ratio of 65 to 85 percent. However, interest rates are often much higher, which is why these loans are better suited for real estate investing that either has a quick turnaround or offers the opportunity to generate a steady, passive income, such as purchasing commercial real estate for the purpose of renting it out to retailers or other businesses. Terms are also typically much shorter, often between six months and a year. Finally, there are other fees that must be considered when looking at lenders for this type of loan, including appraisal fees, title fees, inspection, document processing fees and more. Before you choose any California hard money lenders, it’s important to be sure you fully understand all the specific terms of the loan and what it means for your investment. Because hard money lenders operate differently than banks, there may be terms you aren’t familiar with and each lender will be unique.
What Are the Requirements for Approval?
As you search for the right California hard money lenders to meet your needs, it’s essential to understand the requirements for approval. Hard money lenders are much more lenient than their bank counterparts. For instance, they rarely, if ever, look at your credit score in order to determine if you qualify for a loan. This means you don’t have to have stellar credit in order to get involved with commercial real estate investing. In fact, you don’t even need to have a significant amount of money in the bank. Instead, a hard money lender will look at the value of the property you intend to buy and weigh their risks against the potential income that property can generate. There are also typically no upfront fees to pay or a large amount of paperwork to fill out and file. Finally, you can be approved in as little as a few days versus having to wait weeks or even months to find out if a bank is willing to provide you with the money you’re looking for.
Choosing the Right Lender
Once you make the decision to use hard money loans for your commercial real estate investments, it’s time to start looking for the right one to meet your needs. For instance, it’s relatively easy to find a long list of banks to provide you with the money you need for a traditional loan, even though it may take some time to find the one that best suits your needs. However, hard money lenders in California can be more difficult to find. Because hard money lenders aren’t as regulated as the banking aspect of the financial industry, it’s important to do your due diligence when it comes to finding the right lender for your needs. The good news is there are many ways to find the right lender to work with for your commercial real estate investing. While you can find lenders who work independently to offer money to those who are interested in taking on investing in commercial real estate, it’s often better to look for a financial group that can provide the options and support you need, especially if you’re just getting started in the field.
First and foremost, even though all hard money lending is relatively similar, there are differences, depending on the type of real estate investing you plan to do. For instance, some California hard money lenders prefer to work with investors who purchase residential properties to flip for a profit, while others are looking for investors who are in it for longer term projects, such as buying an apartment complex or multi-family unit to rent out. Still others specialize in investing in commercial real estate. When you’re looking for the right lender to meet your needs, it’s essential to understand what types of projects they prefer and whether they are capable of providing the capital you need to move forward with your commercial investment.
Another great reason to work with a financial group rather than an individual who offers hard money loans is it is much easier to apply and get approved. Although individuals can approve a hard money loan just as quickly, if they are receiving multiple requests or are already involved in several projects, they may be more selective in the process. However, financial groups are a network of multiple investors, which means there is likely one who is looking to work with someone on a project like yours. You will be able to fill out one simple online form and reach a number of investors, giving you a higher chance of finding the right one without having to do a lot of your own research or to apply with multiple lenders individually. They will help match you up with the one who best suits your needs.
Start Your Lucrative Investments Today
Getting involved in commercial real estate investing can not only be appealing due to the high income potential, but it can also be overwhelming if you’ve never invested in real estate before. Even if you’re familiar with residential investing, commercial projects are different. This is why it’s important to find hard money lenders in California who specialize in commercial real estate and can provide you with not only the capital you need to get started, but can also give you the support you need along the way to ensure your endeavors are as successful as possible. When you take the time to carefully choose the lenders you work with, you vastly increase your chances of being a successful investor and get a much better return on your investment, so you can continue to expand your investing and provide a more solid financial future for you and your family.
If you’re interested in getting started in commercial real estate investing, reach out to our California hard money lenders to find out whether you can qualify for these loans and what your future can hold if you choose this lucrative investment path.