Chris Goulart's blog
December 30, 2019 by Chris Goulart
Hard money loans in California have become one of the best substitutes for traditional bank loans and there are several reasons why this is the case. Many people who wish to invest in a property or real estate decide to opt for these quick loans as the procedure of hard money loan approval is much more hassle-free than that of the more conventional loan procedures.
Usually, hard money lenders look for real estate collateral with equity to approve a loan. The collateral can be your property you are investing in or a property you currently own. This is the investors security, so if you fail to pay back the loan as agreed, then your property or the home that is secured as collateral can go to foreclosure.
Hard money lenders approve loans for real estate investments because the real estate properties are the best way to secure a hard money loan (only if the property has equity). There are several buyers who use hard money loans on a regular basis to buy investment properties that require fixing. With this approach the buyers are able to leverage their existing cash on hand and currently owned properties to acquire new investment property.
So are you also planning to invest in a property and looking for Alameda hard money loans? Before you take the plunge into the world of hard money loans, you need to understand the different types of these quick and efficient loan alternatives.
The Types of Hard Money Loans in California
If you currently own a property you can do a cash out refinance to obtain the funding you need to purchase additional investment property. In a cash out refinance you would refinance the existing loan, and replace it with a new, larger loan. The difference between the existing loan and the new loan, less fees, would be the cash out. This can be a good option if you need to make all cash offers, or if you need to bring cash in to close the acquisition loan. The downside of this option is that hard money loans are typically more expensive than bank loans. If you are refinancing a bank loan with a hard money loan, you are trading a lower payment for a higher one. That can make sense sometimes, but you should always consider carefully before exiting an advantageous long term bank loan for a shorter term hard money loan.
Equity loans are typically made in second or third position and act in the same manner as a cash out refinance, with the exception that you get to keep your existing loan. This can be a good option to avoid paying off an advantageous long term loan. The down side is that the loan to value ratios are often lower than they would be for a new first. This option depends on how much cash you need and how much equity you have in the existing property.
Bridge loans are usually meant for sellers looking to buy a new home before selling their existing home while needing cash from their existing home. These bridge loans can help finance not only investment properties, but also owner occupied properties.
If you are new to hard money loans in California and want to learn more about this alternative then get in touch with All California Lending. They specialize in hard money loans, and have been in the business for years. You can also apply for Alameda hard money loans with them – they are located within driving distance of Alameda and the surrounding areas. For more details visit https://www.acalending.com/hard-money-loans-alameda-county/
July 1, 2019 by Chris Goulart
In California, lending on residential rehab projects is considered as a relatively safe investment option during accelerating as well as declining real estate markets. The best way to lessen risks associated with rehab lending is by providing low loan-to-value (LTV) ratio on loans. LTV measures the percentage of the value of the property that is meant to be financed with a loan.
For lowering the risk, the first step is performing thorough research on the borrowers who have submitted their loan requests. Not only in case of rehab lending in California but in every business the key principle is to know the person well with whom you are dealing whether it is your business partner or your borrower! It is extremely important for a lender to check and know about the previous projects of the borrower which includes completed projects, current projects, liabilities and likewise. This is because when you choose a reliable and more qualified real estate borrower who has an established track record the risk of any defaults of the loan in future reduces to a great extent.
The next thing that is important for lessening the risk of each potential loan investment is taking a more conservative approach as it adds value to the projects. Make sure to choose suitable real estate operators having enough security value for protecting the rehab lender in the worst cases of downside risk. Therefore, finance each loan to a conservative 65 to 70% LTV as you get maximum security from the project. When you provide high LTV loans there is a possibility of greater risk and controlling the real estate prices is next to impossible when the rehab project is completed and put on the market for sale. So a low and conservative LTV approach can be the best way to protect your investors.
Rehab projects are based on an ARV value, which can justify lending 100% of the LTV of today’s “As-Is” value. While evaluating such a project risk adjusted loan investments are the key. Therefore, the process of lessening the risk should begin with a thorough research about borrower followed by a conservative LTV. As it is a rehab project the future value will increase i.e. the 100% LTV loan of today will be 65% in the future for its completed value. This benchmark is ensured through the process of fund control – controlling and disbursing the funds for the rehab work. Ensuring the work gets done also ensures the ARV LTV stays within guidelines.
In short, rehab lending in California is a process that originates from borrowers needing funds for improving a property and hence improving the community and neighborhood. As you can see how important the role of a borrower in such scenario is, therefore, it is extremely essential to check the track record of the borrower as it holds a great importance in guaranteeing loan decisions to protect the investors.
By balancing aggressive financing, proper valuation, a managed fund control account and borrower experience, lenders can help mitigate risk to investors while still offering highly competitive and flexible rehab loan terms.
All California Lending offers flexible rehab lending California projects that fit your needs well. To know more about their projects visit https://www.acalending.com/rehab-lending/