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.