Real Estate Cycles & Real Estate Investment
Everything always goes in cycles. In our real estate investing world we have experienced smooth sailing for many years but now we are facing challenging times that have forced everyone to regroup and invent their approach to the investing business and return back to the basics.
Real Estate Investing Basics
- Focus on a simple basic approach to locating and purchasing properties through face to face contact. For years we have read books, attended seminars and followed many newly revised methods for locating, purchasing and financing properties. The Internet has opened many avenues for investors to easily search through mountains of properties without ever visiting the site or talking with a seller or agent.
- Locate a geographical area you want to “farm” and focus on locating properties within that area. Become an expert in that area so you are knowledgeable of property values, rental rates, schools and community amenities, the job market, etc.
- Many people are now knocking on the doors of for sale by owner properties and making direct contact with the owner. Returning to the basics means building a relationship with the seller and working together as a team to create mutually agreeable terms to acquire the property.
- Many older people may not be internet savvy. They may not advertise their properties on Craig’s List or other internet sites. Some of the best properties with high equity will have to be located the old fashioned way…farming neighborhoods in your area.
- What is the seller’s motivation? For many FSBO’s, the seller may not be totally motivated by money. Once we understand the seller’s motivation and identify their needs, we can then know how we can assist the seller and how we can structure the offer.
- People like to help people. It should be our main purpose to help the seller whether we are offering to purchase the property to rehab, wholesale, lease purchase, etc. Many times as we develop a good relationship with the seller, they are willing to help us purchase the property by being creative in the offer with owner financing and agreeable terms.
- Sellers have also experienced many challenges this year. They have lost equity in properties because of declining values, financing issues and having compete against a market flooded with homes for sale. Many sellers are more willing to consider mutually agreeable terms to sell their properties.
Yes…there have been many challenges over the past years for real estate investors, but as in so many other areas, usually the simple things work the best. We are reminded that what is important is helping people first. Returning to the basics of real estate investing will create continued success as we enter into the new year.
If you are interested in exploring the options of real estate investing with private money loans, please give us a call a 707-315-1119 or fill out our contact form or our borrower form and one of trained private money loan specialists will be in touch promptly to answer your questions.
Why Private Money Loans Make Sense
The current environment is not exactly favorable for financing your real estate investments, in fact it is next to impossible to borrow from traditional banks and it appears for now that it’s a trend that will go on for some time. The facts are credit is tight, real estate investing is not the first choice for where banks put their money and if you have any dings to your credit you are going to be left in the cold when it comes to financing your net venture.
When Traditional Funding Sources Have Dried Up
So what do you do when all the traditional sources for financing have dried up? Well you have to get creative and look into other ways to gain funding or just sit and wait for things to get better. Most investors I know think that now is a very good time to get a great price on investment property. Prices are lower than they have been in decades and there are plenty of short sales and foreclosures that make sense as rental properties especially at current pricing. So if you are like the kid in a candy store with plenty of stuff to buy but have empty pockets I want to show you an idea you may not have tried.
Real Estate Funding Options
There is no shortage of folks out there that have seen the value of their retirement nest egg dwindle down enough to wonder where the bottom is. The concept simply put involves finding a company, many can be found online, of your choice which specializes in Self Directed IRA’s and making your real estate investment using the company to facilitate. Most traditional companies tend to invest in traditional assets such as stocks, bonds and mutual funds.
Better Possible IRA Returns
Did you know you can invest in real estate, mortgages, leases, and other asset backed investments? With a truly self-directed plan you can invest in assets you know, understand, and effectively control. The government has increased contribution limits to allow you to take full advantage of saving for the future. This allows you to compound your assets quickly with investments you select. You can decide which retirement plans are best and what types of investment you’ll want to make in that plan. There are IRS rules prohibiting self-dealing and other limitations but in general it is fairly uncomplicated. Many of the companies out there have tons of information on their web sites to help you understand how the entire process works. There are fees involved as well so educate yourself.
Go seek out a company specializing in this type of plan and do your research as to what the limitations are, and as always consult your tax professionals before you move any cash from your existing plan. In other words protect yourself at all times. The bottom line is this, today traditional 401K plans are losing millions and it will likely be a very long time, if ever, before those losses will be recouped. This is an opportunity to take full advantage and put your money into something you know and believe in.
Are You Satisfied with Your Current IRA Plan?
Can you really say that about your existing plan? Yes you can choose which direction to put your dollars in traditional plans but you don’t typically have the luxury of choosing the actual company your investment goes to. There are plenty of companies that offer this so make sure you study as many as you can carefully. Look into this and I am almost certain you will agree that it may be one of the best ways to finance your real estate today. You may find that that when you are in charge of investment vehicle you might just have a better chance at higher returns. And you don’t even have to go to a bank.
If you are interested in exploring the options of private money loans as an alternate IRA Investment plan, please give us a call a 707-315-1119 or fill out our contact form and one of trained private money loan specialists will be in touch promptly to answer your questions.
Understanding Loan Terms
When considering an investment property loan from an institutional lender, you need to consider many of the variables involved in the loan terms being offered. It’s important to understand the different loan terms that are used when speaking of both traditional mortgages from banks and also private money loans from private money lenders. We discuss some of the most prevalent loan terms used below:
The cost of borrowing money, i.e., the interest rate, is one of the most important factors. Interest rates affect monthly payments, which in turn affects how much you can afford to pay for a property. It may also affect cash flow, which affects your decision to hold or sell property.
There are many different ways a loan can be structured as far as Simple interest and Amortized. A simple interest loan is calculated by multiplying the loan balance by the interest rate. So, for example, a $100,000 loan at 12% interest would be $1,000.00 per month. The payments here, of course, represent interest-only, so the principal amount of the loan does not change.
An amortized loan is slightly more involved. The actual mathematical formula is complex, so it requires a calculator (try mine, at www.legalwiz.com – click on “calculators” from the left navigation bar). The amortization method breaks down payments over a number of years, with the payment remaining constant each month. However, the interest is calculated on the remaining balance, so the amount of each monthly payment that accounts for principal and interest changes. For the most part, the more payments you make, the more you decrease the amount of principal (the amount of the loan still left to pay) owed.
A balloon is a premature end to a loan’s life. For example, a loan could call for interest-only payments for three years, then be due in full at the end of three years. Or, a loan could be amortized over 30 years, with the principal balance remaining due in five years. When the loan balloon payment becomes due, the borrower must pay the full amount or face foreclosure
With interest rates uncertain in the future, many lenders are offering variable-rate financing. Known as an “ARM” loan (adjustable rate mortgage), there are dozens of variations to suit the lender’s profit motives and borrower’s needs. ARM loans have two limits (“caps”) on the rate increase. One cap regulates the limit on interest rate increases over the life of the loan; the other limits the amount the interest rate can be increased at a time. For example, if the initial rate is 6%, it may have a lifetime cap of 11% and a one-time cap of 2%. The adjustments are made monthly, every six months, once a year or every few years, depending upon the “index” the ARM loan is based. An index is an outside source that can be determined by formulas, such as:
- “LIBOR” (London Interbank Offered Rate) – based on the interest rate at which international banks lend and borrow funds in the London Interbank market.
- “COFI” (Cost of Funds Index) – based on the 11th District’s Federal Home Loan Bank of San Francisco. These loans often adjust on a monthly basis, which can make bookkeeping a real headache!
- T-Bills Index – this is based on average rates the Federal government pays on U.S. treasury bills. Also known as the Treasury Constant Maturity or “TCM”, these are the rates banks are paying on six month CDs.
If you are interested in exploring the options of private money lending or private money loans for commercial real estate investing, please give us a call a 707-315-1119 or fill out our borrower form or contact form and one of trained private money loan specialists will be in touch promptly to answer your questions.
Bridge Loans for Commercial Investing
A commercial or residential property hard money loan is also known as a bridge loan in commercial investing — it bridges you from a temporary situation to a more permanent situation. The goal is to be bridged from a hard money situation to a more conventional situation where you’re going to go from a very expensive interest rate payment per month to something much lower like a traditional bank loan/commercial mortgage or you plan to sell/flip the property fairly quickly.
5 Major Differences between Commercial Hard Money Lenders and Conventional Lenders
1 — Interest Rates
A conventional loan’s interest rates are lower than a hard money loan. In fact, hard money loan interest rates can be up to three times higher than a convention loan.
2 — Upfront Costs
In a conventional loan, your upfront costs can be as low as 1% of the loan amount. On the other hand, a hard money loan will charge 2-5% just to use their money.
3 — Loan Terms
A conventional loan term can be as little as five years or all the way up to 30 years. A hard money loan term is typically between 6-12 months.
4 — Borrower’s Credit
Your credit is very important to a traditional lender. Hard money lenders may check for major flaws, but because the loan is based on the equity of the property or terms of deal, you can have flaws in your credit and still qualify for a hard money loan.
5 — Closing Time
Closing time is the amount of time it takes to close a deal. A conventional loan is more time consuming because they have to underwrite the deal, order inspections, go through their legal department, get a “yes” from their loan committee, and put together their closing paperwork. This can take 30-60 days.
Hard money loans can close in as little as 7 days because the hard money company is usually owned by one or two rich individuals who are lending out their own money.
3 Most Common Commercial Hard Money Questions
Does My Credit Matter?
The answer is maybe. When a hard money lender goes through the process of qualifying the deal and you, they look at the deal in three ways. They look at the property, they look at the area and then they look at you, so you’re third on the totem pole. However when looking at you, if you have bankruptcies or foreclosures, you may have some explaining to do.
Do I Need to Put Money Down?
The answer is yes because there is no 100% financing for hard money loans. You will have to put between 20-40% down depending on your commercial hard money deal. This is the down payment plus the closing cost, which can be up to 5% or 6% of the loan.
The great thing about hard money lenders is that they are open to creative deals. I recently had a student purchase a 90-unit apartment for 3 million dollars with 10% down. The hard money lender required a 30% down payment so the student negotiated with the seller to carry the other 20% for three years as a second mortgage. The hard money lender was open to this deal because, their 30% down requirement was satisfied.
What’s the Secret to Getting My Loan Approved?
You need to have a realistic investing exit strategy that everyone involved in the deal agrees with. Everyone involved would be yourself, your lender, the person you’re borrowing your money from, your property manager, and your mentor if you have one. Having everyone agree on an exit strategy will put you in the best position to get your loan approved and your deal closed.
If you are interested in exploring the options of hard money lending or hard money loans for commercial real estate investing, please give us a call a 707-315-1119 or fill out our borrower form or contact form and one of trained private money loan specialists will be in touch promptly to answer your questions.
Why Private Money Loans Are a Good Choice
Since the official start of the ongoing “Credit Crisis” back in the Summer of 2007, Private Money loans (debt, equity, and / or mezzanine) and Institutional Funds (i.e., Hedge Funds and Private Equity Firms) have provided more readily available access to funds for residential and commercial real estate investments than many of the largest U.S. banks. Non-traditional funding options have included individual investors (“Silent Partners” or Equity Investors), Crowdfunding, and Private Money or Hard Money Lenders. With Private Money, the collateral for the loan is seen, many times, as at least equally as important as the borrower’s qualifications, which provides more flexible underwriting guidelines as compared with Bank loans.
Many Debt and Equity Investors or Lenders pool millions or billions of dollars of funds from investors, and then provide them as equity money or loan options such as “Asset Based Loans” in which they are funded based upon the potential ARV (After Repair Value) or Future Value of a distressed or non-distressed property. The loans are made based upon current or future “LTVs” (Loan to Value) or “LTCs” (Loan to Cost) for a potential cosmetic “Fixer Upper”, or a deal which requires major renovation or construction repairs. In many cases, an investor doesn’t need to provide “Full Doc” underwriting items such as past tax returns or other detailed income or asset requirements.
Private Money Loans Excellent for Fix & Flip
For “Fix and Flip” or “Fix and Hold” residential deals, the Private Money options can be a much better option for investors since they can fund their loans much faster than government backed or insured financial institutions (“Time is money”). The difference in average funding time periods from start to finish can vary between a week or two for private money sources to well over a few months for government-backed financial entities.
In some cases, private loans may fund in a few days from start to finish with the bulk of the work completed online (i.e., title, escrow, loan, real estate contracts, third party reports, etc.), amazingly. Due to the large number of all cash buyers for properties in recent years, sellers don’t typically want to wait a few months to sell their home and close escrow. The faster an investor can gain access to funds, get formally qualified, and close escrow on a potential deal, then the more likely they will get their purchase offers accepted at the lowest offer prices possible.
Private Money Solutions vs. Big Banks’ Derivatives
One of the newer private money funding options in recent years is something known as “Crowdfunding” in which an investor solicits contributions from either a small or large number of people, which usually originates from the online community. Crowdfunding has been used in the past from many start-up businesses seeking cash to fund their business ideas partly since business loans from their local bank branches were quite challenging to qualify for in recent years. Crowdfunding has also been used by many Charities to either raise awareness for more individuals or groups of people, or to help pay the Health Care costs for friends and family members in need. Crowdsourcing, in turn, has been used by computer designers to share free software code, or other ideas which benefits all parties.
Even though some financial analysts and Economists have said that the implosion of the “Sub-Prime Mortgage Loan Bubble” was one of the main catalysts for the financial meltdown, the “Credit Crisis” is truly directly related to the near popping of “The Derivatives Market Bubble.” It has been suggested by a fair number of people in the financial industry that the size of the “Derivatives Bubble” (i.e., Credit Default Swaps, etc.) worldwide is somewhere within the 1,000 to 2,000 + Trillion Dollar range. As a comparison, the size of the outstanding U.S. Student Loan Debt just recently surpassed $1 Trillion, and the size of the U.S. Budget Deficit is alleged to be approximately $17 Trillion Dollars.
It has been reported numerous times that many of the Big Banks here in the USA have Derivatives obligations which far surpass the market value of their entire parent companies by a very high number. It has also been reported that 2014’s Derivatives investment dollar amounts for many of these same Big Banks are now at least 20% higher than back in 2008. If true, then aren’t the Big Banks now potentially financially weaker today than back near the start of “The Credit Crisis”?
Crowdfunding for Real Estate Investment
Crowdfunding has evolved in recent years to become one of the best options for people to invest in Real Estate, either directly or indirectly, after the financial markets effectively “froze” once the “Derivatives Bubble” almost completely popped back in 2008. In effect, Crowdfunding has eliminated the “Middleman”, or the Banks, and allowed individual investors to invest in discounted Real Estate assets for potentially a fraction of the current or future market values. One of the best solutions for Real Estate Funds as it pertains to the “popping” and “frozen” financial markets has been to work with individual investors directly and much more efficiently. This helps all parties focus on the best ways to generate profits with a true “Win/Win” mentality.
Who Reaps The Profits: Banks or Investors?
Instead of the Big Banks reaping all of the financial rewards related to their own Real Estate investments while still providing their bank customers interest rate returns of between just a measly 0% to 1% interest, Crowdfunding, and other private equity or debt options, allows the investors to share in the profits too. Crowdfunding typically offers Debt or Equity investors a variety of investment options and financial solutions with seemingly fewer risks and much higher returns than with investing their funds with their local bank branches, ironically.
In parallel with quicker lending or investment options, more buyers and sellers are matching up online through the internet, Social Media, real estate networking and investing groups, and with better access to real-time Big Data, and then are flipping and closing their home sales in a matter of a few days as opposed to a few months. These quick online home flips are somewhat akin to “Day Trading” stocks. Without the more efficient access to private capital and online real estate information, then the quickest “Fix and Flip” deals may not be as possible today.
In today’s ongoing “Credit Crisis World”, it may be more likely that an individual neighbor, a group of neighbors or townspeople, a Crowdfunding group, or a private funding company may help fund a person’s business idea, charity, dreams, or real estate investment options rather than their local bank. In any “Boom or Bust” Housing Cycle, it is truly the access to capital which typically drives the directions of the housing markets either up or down.
Hopefully, more U.S. Banks try to later follow more logical, efficient, and rational underwriting methods used by Private Money lenders or investors so that access to money becomes easier for more Americans. If you are interested in exploring the options of private money lending or private money loans, please give us a call a 707-315-1119 or fill out our borrower form or contact form and one of trained private money loan specialists will be in touch promptly to answer your questions.
If You Need Capital Fast a Hard Money Loan Can Be the Answer
There are a lot of misconceptions regarding Hard Money Loans and Hard Money Lenders. Most of the confusion surrounds the differences between conventional mortgages and hard money loans. I wanted to take a moment and try to answer many of the general Frequently Asked Questions as well as to compare a hard money loan to a Conventional non-owner occupied investor loan.
Frequently Asked Hard Money Loan Questions
How does the program work?
HMLs provide Real Estate Investors access to asset based capital. We can fund quickly, typically within 72 hours of receiving the final docs from the Title Company. Hard Money is available for adequately collateralized loans on single-family residential houses and other Real Property including commercial projects.
What is the interest rate?
The interest rate depends upon the Lender. The rate will range from 14% interest only to 18% interest only annual interest rate payable monthly in most cases.
What Loan-to-Value are MLS looking for?
Typically a loan does not exceed 70% of the after-repaired-value (ARV).
How long is the loan for?
HMLs typically write the notes from 6 months to 12 months depending on the Lender and your needs.
What are the costs?
Costs vary depending on which Lender you use. All loans will require at-least a Title Policy, Vacant Dwelling Insurance, Inspection, “As-Is” Appraisal & Flood Certificate. Most require origination points.
Can I get repair money?
Yes. Hard money loans can fund repairs. Hard money loans require a “Draw Request” form to be filled out to identify the completed repairs to the property, Copies of the invoices from the vendors. Then, we will pay you once the work is inspected-hard money loans do not pay in advance for any work.
Does my credit matter?
Yes and no. For the most part, hard money loans look at the value of the property after it is repaired, how much you are paying for it, and how much the repairs will cost to determine how much we will lend. In some cases, with your consent some hard money lonas may need to checkout your credit history.
How do you decide how much to loan?
Typical loans range from $25,000 to $1,000,000: All loans are considered on a case-by-case basis. Each hard money loan has their own criteria.
Do hard money loans need an appraisal?
Yes, hard money loans require “as-is” and “as-repaired appraisals”.
Do hard money loans require inspections?
Yes, hard money loans require inspections including the interior before funding and before a repair draw to ensure the work is completed in a satisfactory manner.
Do I need to put any money down?
In most cases, Yes. Most hard money loans want to ensure that you have enough resources to finish the repairs and cover the costs of the loan plus any surprises. Therefore most hard money lonas require that origination/discount points and other required items be paid at or before closing. We are confident that if you cannot afford to close you typically cannot afford to take out this type of loan.
How much will my payments be?
To figure your monthly payment simply, multiply the rate by the loan amount and divide that number by 12.
Will hard money loans finance commercial properties?
Yes, many hard money loans will on a case-by-case basis finance commercial properties and then only if the loan is secured by improved real property such as the building and land.
Will hard money loans finance apartment buildings?
Yes, many hard money loans finance apartment buildings however understand that it will take us longer to get our due diligence done.
Do hard money loans allow interest to be deferred to the end of the loan?
Some hard money loans do. Most however have interest payable monthly. Again, we are confident that if you cannot afford to make monthly interest payments you typically cannot afford to take out this type of loan.
How do hard money loans compare to a traditional non-owner occupied investor loan?
You might be surprised how competitive hard money loans really are. Take a look at this comparison;
Hard Money Tradtional Lender/Mortg. Co.
Time to Close 1 – 2 weeks 4- 6 weeks
Monthly Payment ($100k loan) $1166.66 @ 14% I/O $1098.00 @ 7% + MI
Credit Qualifications None – 65% of ARV Yes – Varies
Cost to Obtain Loan 4% – 5% 3% – 6%(Incl. Orig. Fees & SRP)
Pre-Payment Yes – 3 mo. min Yes – Up to 2 years
In many cases an hard money loan can be obtained faster and easier then a conventional loan and while in almost all cases the amount you can borrow from a hard money loan exceeds the amount you can qualify for from a convention lender the cost difference is minimal. Hard money loans are not for everyone and every hard money lender has a different program and qualification process. However if you need fast access to capital for REI then a hard money lender such as California Private Money Lenders may be your new best friend. Give us a call at 707-315-1119 or fill out our Borrower Form or Contact Form and one of our hard money loan specialists will be in touch promptly to answer your questions.
Why These Terms Are Different
Although the terms Pre-Qualification and Pre-Approval are often used interchangeably, the two differ greatly in the process involved in obtaining them and in the benefits they provide. Here’s what you need to know about each of these terms:
This is a lender’s informal way of estimating how much you may be able to borrow. It is based on the information you provide, often by phone, none of which needs to be verified or documented. Since a letter of pre-qualification gives you an idea of how much house and the amount of mortgage payments you can afford, the best time to get pre-qualified is as soon as you decide you want to buy a home.
You supply to the lender unverified information about your income, assets, debts, and possible amount of a down payment. There is no cost involved in obtaining pre-qualification, and there is no commitment for either party. Understand, however, that a letter of pre-qualification does not mean you will get a loan; it is simply a ballpark figure of the amount you can afford to spend on your home and an indication that you might qualify for a mortgage in that amount.
This designation is a firmer commitment on the part of the lender and requires a more detailed and formal process which includes a credit check and employment verification. You will need to provide W2’s, pay stubs, tax returns if you are self-employed, and bank and investment statements to verify your assets.
While this process is more detailed and complex, it is definitely worth your time and effort! Not only does it allow you to shop for Jersey Shore homes with more financial confidence, pre-approval also shortens the actual loan application process and often allows for quicker settlement. In addition, sellers appreciate the fact that pre-approved house hunters are serious about buying their property and that financing should not be a problem. This was shared by a East Coast Broker and Lending Firm.
We breakdown the basic differences between pre-qualification and pre-approval below:
- Informal collection of data
- No documentation required
- Verification not done by lender
- An estimate of the amount you might be able to borrow.
- Not an entitlement to a loan; simply the first step in the home buying process.
- Comprehensive collection of data
- Documentation required
- Verification is done by lender
- Certification of how much money the lender would most likely be willing to loan you
- Not an absolute guarantee of financing. Funding won’t be given until after the property appraisal, title search, and any other items needing verification have been completed.
The best way to understand how we can potentially help you with your your private money loan is to give us a call. We can discuss your specific home buying needs and we offer personalized service and pricing. Call us today at 707-315-1119, or fill out our borrower form or contact form to learn more about our California private money loans and what California Private Money Lenders can do for you.
Trust Deed Investments
Trust deed investments should be an important part of any investor’s portfolio. Whether a corporation, pension plan or private individual, trust deeds offer a unique combination of superior returns, outstanding security and investor convenience. What do trust deed investments provide for your investment portfolio? Read through our reasoning below:
All knowledgeable investors are aware of the incredibly low rates being offered by financial institutions on certificates of deposit and money market funds. Even investors with substantial assets can only do marginally better and must diversify or risk losing value to inflation. The constantly changing stock market can be even less appealing.
For the investor who desires higher fixed income returns, investing in First Trust Deeds can deliver interest rates between 8 and 12 percent. These rates are fixed and can be anticipated for the duration of the loan. Payments are made monthly and the investor receives an itemized statement for each of his loans.
As a prudent investor, you should always associate higher returns with higher risk. Investing in First Trust Deeds, as with other investment vehicles, are no different. They do come with the possibility of default. However, this risk is significantly mitigated by two factors. First, each loan is secured by a promissory note payable to you on a single investment property. Secondly, the borrowers are often real estate veterans who typically have high credit scores with a proven track record of success and reliability.
Nevertheless, defaults do occur. In this event you, as lender, may obtain sole possession of the property and either keep it for a rental or sell it. This fact is significant because usually First Trust Deeds are written at significantly discounted loan to value ratio, typically 60 percent or less. Investors should feel comfortable that in the event of default and foreclosure they will receive title to a property potentially with a value greater than the loan amount.
As protection to the lender all procedures undertaken by banks to ensure the security of their loans are also required when Private Trust Deed Investments are executed. Appraisals and title searches are performed. Hazard insurance is a requirement, and all transfers of monies are handled by a licensed and bonded escrow company.
An investor may choose to perform and all activities necessary to generate a real estate loan himself. For the uninitiated, this can be a difficult. Private Money Brokers that negotiate and administer their Trust Deed Notes add one more dimension to these investment vehicles, convenience.
They have the knowledge and expertise to oversee and expedite the process and to keep all aspects of the loan in compliance with regulators. They relieve the investor of the paperwork headache. All components of the loan process, from origination to servicing, can be handled or outsourced by the Broker. California Private Money Lenders will continue to monitor the loans and provide expert advice throughout the life of the loan.
The best way to understand how we can potentially help you with your trust deed investments to give us a call. We can discuss your specific investment portfolio and investment goals and offer personalized service and pricing. Call us today at 707-315-1119, or fill out our borrower form or contact form to learn more about our California private money loans and what California Private Money Lenders can do for you.
When Your Loan Doesn’t Fit the Equation
Real estate investors with multiple properties can face an uphill battle when looking to obtain financing for their investment properties. While income, credit and the ability to repay should be the determining factors, many funding sources cap the number of properties an investor can own. This can make obtaining financing for new properties, or refinancing existing properties, difficult at best.
Why You Need A Private Money Lender
We specialize in alternative financing, and our programs do not cap the number of properties that can be owned by a single investor. We can help obtain financing for most property types here in California, from residential investment property to multi-family property, commercial, mixed use, even industrial property and land. In addition, we have programs that can compete on rate.
When people think about alternative financing, private money or hard money lenders they often associate that with rates at or above 12%. We have a number of programs to fit the needs of qualified investors, even those who own many properties, that have competitively priced rates in the single digits. These programs are not limited to individuals with excellent credit, even with credit challenges we can often times offer highly aggressive pricing.
Many Factors Are Taken In Account
Our pricing takes into account a number of factors. Credit is one factor, but other compensating factors can overcome even the most challenged credit. Loan to value is another factor; with the right loan to value we can often times offer pricing that is as good or very similar to what we could offer someone with excellent credit.
Most of our funding is private, meaning we do not have rigid guidelines. Rather we are able to offer terms based on a make-sense type of underwriting. If the risk is lower, whether through income, assets, credit, loan to value or other factors that can be reflected in the pricing we are able to secure for your transaction. Every transaction is different and unique.
The best way to understand how we can potentially help is to give us a call. We can discuss your specific transaction and offer personalized service and pricing. Call us today at 707-315-1119, or fill out our borrower form or contact form to learn more about our California private money loans and what California Private Money Lenders can do for you.
What To Know About Private Lenders
Private lenders have been around for, well, forever: as the saying goes, lending money is the second-oldest profession. In advanced economies today, private or “hard money” loans are used by real estate investors ranging from professional renovation investors with excellent performance records to desperate last-resort borrowers with terrible credit histories.
While there remain some back-alley loan sharks around doing shady deals with desperate investors who aren’t responsible enough to borrow from anyone else, most hard money lenders are open, ethical businessmen and women with real estate acumen and extra cash to invest. There are even some formal banking institutions who engage in hard money lending.
Here are some cold, hard facts about the hard money industry to help you determine if hard money is the right money for you.
Hard Money Lender & Loan Facts
Fact #1: Hard money deals are often sought after for their quick turnaround (usually within 7-14 days to process). Any investor interested in flipping a property knows that time is of the essence and needs to have funding available sooner rather than later.
Fact #2: One way in which hard money lenders differ from more conventional lenders is in the fact that many hard money lenders tend to be local and more hands on in terms of wanting to view the property before lending money on the deals. Hard money lenders want to get that up-close-and-personal look and feel for a property before making a decision to lend on a property.
Fact #3: Hard money loans are generally much more expensive overall than conventional loans for both the interest required on them as well as points the buyer is expected to pay on them. Generally speaking, investors seeking hard money can expect to pay anywhere from 10 to 20 percent interest and get hit with as much as eight points with some lenders in some states.
Fact #4: Hard money loans are most often sought by investors doing short term deals rather longer term deals. Most hard money lenders will lend from periods of six months up to a few years.
Fact #5: While the red tape is certainly less and the turnaround time is much faster, more hard money lenders are taking a closer look at borrowers’ experience and credit history. After the real estate crash of the late ’00s, many lenders were triply burned, as borrowers defaulted, but foreclosures were slowed to a crawl for political reasons, and values had crashed. So while ten years ago lenders were more open to lending money as long as there was sufficient equity, today they tend to be more conservative and screen out rotten-apple borrowers more thoroughly.
Fact #6: Most private lenders require borrowers to use a specific appraiser who the lender knows and trusts, who will not be swayed by the investor’s pleas for padding the value.
Fact #7: Most hard money loans are structured very similarly to balloon payments with due dates usually spread over no more than one to two years after the loan is issued.
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