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SoCal Hard Money Lenders
SoCal Hard Money Lenders
Delancey Street is a premier, and top rated, SoCal county hard money lender. We offer loans on residential and commercial properties alike. Real estate investors turn to us when they need creative financing – fast. Hard money lenders are individuals or companies that loan money to prospective buyers of real estate. The collateral is generally the real estate in question. The service is most often used by real estate investors who need the hard money to close real estate deals. Having a hard money lender already lined up gives real estate buyers an edge in any deal they are putting together. Flippers, especially, find this an invaluable service to fund the properties they wish to acquire quickly and easily. Traditional loans, through banks and other financial institutions, are not suitable for these types of ventures.
Investors require fast money and/or funds to close deals, so if they form a relationship with hard money lenders, as they put deals together, they stand a better chance of succeeding. Using other people’s money has long been an accepted method of real estate investing, but it is not without risks. That is why investors must demonstrate to potential lenders how they will profit.
The general goal of real estate investors is to purchase properties to create long term, or short term, wealth. Regardless of whether you fix, and flip – or buy, and hold, the end result is still the same. The goal of the hard money lender is to put his money to work for him. Real estate investment is one of the safest ways to foster wealth, and hard money lenders fill a need that would not otherwise be met. Those who have money to invest will certainly obtain a better return than on savings accounts or Certificates of Deposits. This does not mean it is without risks.
One of the things real estate investors need to be aware of is the higher interest rates that come with hard money loans. But even with higher rates, a shrewd investor can build a great real estate portfolio. Traditional banks, while they have better rates, cannot close a deal as quickly as hard money lenders.
Different types of investors require the use of hard lenders. Commercial investors often need them to bridge the gap between what a traditional bank will loan and the asset they are trying to purchase. Builders and developers need funds to purchase land on which they plan to build. Residential real estate investors need funds to purchase and/or rehab properties to rent or “flip.”
Though hard money lenders charge higher interest rates, the benefits far outweigh the negative aspects of the experience. Willingness to take more chances and speed of funding are two of the benefits of seeking out hard lenders.
Usually, hard lenders will lend a percentage of the value of the property. In contrast, traditional loans will lend up to 90-100% of the value of the property. This is a big difference between traditional lenders and hard money lenders. Most hard money lenders want to lower their risk, so that means lending loans at 50-60% LTV. In addition, hard money loans typically come with a shorter loan term than hard money loans.
Hard money lenders in SoCal loan money in varying amounts for property purchases, construction, rehabbing and refinancing. Each has its own set of parameters with which residential and commercial borrowers must comply. Investors with low credit scores or whose income would not pass muster for a traditional loan find that they may have better luck with a hard lender. Borrowers can quickly determine if they can secure a loan and can move forward swiftly with the real estate purchase.
The relaxed requirements and adaptable guidelines of hard money lenders can help the real estate investors ensure that funds will be available when they need them. The application process is simple, and while the loan must be repaid quickly, it is a resource that investors can use over and over.
If you find yourself in need of a loan for the purpose of buying real estate and you’ve run into problems, there’s a solution. Hard money loans provide real estate investors an alternative when a traditional mortgage loan doesn’t work out. This is not an uncommon situation – it happens all of the time. In fact, it’s possible to have all of your ducks in a row, good credit and all, yet still not qualify for a bank loan. Hard money loans are asset-based and short-term. Keep reading to learn more about this loan product.
About Hard Money Loans
Traditional mortgage loans primarily assess your credit scores and income to gauge your ability to repay the loan. Hard money loans are different because the key factor is the value of your property as collateral. Hard money lenders are investment firms and individual investors. They use a different approach to lending that involves assessing applications on a case-by-case basis. Hard money lenders are far more lenient and are often willing to forgive poor credit, bankruptcies and foreclosures. They assess the individual’s situation instead of just following a strict list of requirements.
There are a variety of different hard money loan types, such as the fix-and-flip loan, bridge loan, construction loan and owner-occupied loan. The owner-occupied loan is far less common because hard money lenders shy away from the regulatory nightmare that owner-occupied consumer loans can create. Providing these loans can result in compliance requirements that would not exist otherwise. If you’re interested in this type of loan, there’s hope because about 10 percent of hard money lenders still offer them in some states.
A fix-and-flip loan is for the purpose of buying, fixing up and reselling a property, at which point you’ll pay off the loan. New construction loans enable real estate developers to start a new project and either refinance or sell the property right away. Bridge loans enable you to buy a new property before you get the cash down payment from selling a property that you already own. A bridge loan also allows you to buy a property fast, then refinance or resell it.
How Hard Money Loans Work
There are several reasons why a real estate investor would be interested in a hard money loan. For starters, the application process is streamlined and couldn’t be easier. Additionally, the turnaround time can be less than a week. Depending on the lender, there’s a chance that you could apply for a loan on Monday and receive funding by Friday, if not sooner. There’s also the unfortunate issue of not qualifying for a traditional mortgage because the decision was based on stringent requirements that leave little room for considering special circumstances.
Typically, borrowers must put cash down on a hard money loan and the amount required is based on the Loan-To-Value (LTV) ratio or the After-Repair-Value (ARV) ratio. Instead of monthly principal and interest payments, there’s a chance that you will only have to make interest payments. There are even some loans that don’t require any payments until the loan maturity date. Just keep in mind that every lender is different and has their own criteria. When the loan matures, a balloon payment settles the balance and includes the principal, all remaining interest and any fees that have been added to the loan.
Is a Hard Money Loan a Good Alternative?
Everyone’s situation is different, which means determining whether a hard money loan is right for you requires an assessment of your needs. People often choose hard money loans because they are unable to find a less expense product, have a poor credit score or need money fast. There’s often a strategic decision to move forward with a hard money loan despite the realization that hard money loans have high interest rates, short terms and a lot of fees. Why? Because access to money can be the difference between success or failure as a real estate investor.