California Hard Money Loans As an Alternative Form of Financing

California hard money loans are a specialized type of product. Ranging from rehab lending on residential fix and flips to larger commercial lending for acquisition, refinance or to pay off a discounted note, there are as many hard money scenarios out there as there are product types.

In addition to the scenario, the location must be taken into account when talking about hard money lending. This is perhaps the most important aspect of this type of underwriting, and why it is imperative that you work with a hard money lender who knows the area where your property is located. Having knowledge of the area will allow for more flexibility when structuring a hard money loan, with regards to both a higher potential loan to value and lower rate and fees.

California hard money loans are a bit different from the rest of the US when it comes to these types of products. Typically, the loan to value can be a bit more aggressive, which can be a big deal these days when many hard money lenders in other states are capping this number at 50 - 60%. In addition, the abundance of private investors within the state means that there is likely money for your niche project that may not be available in other states.

One such niche of loan products dovetails nicely with the California real estate market's current condition. These are rehab loans, meant for fix and flip investors. These real estate investors do not hold property long-term, but rather buy with the goal of selling as quickly as possible. Typical holding times for these types of transactions can range from 30 days to 150 days, depending on the amount of rehab involved with the property. In California, with the large amount of distressed properties on the market, there is an opportunity for investors to be able to purchase below market value and sell before the market has the chance to fluctuate. These specialized loan products are a great way to allow investors to take advantage of this highly specific market.

These loans are structured in such a way where there is no prepayment penalty. In exchange for this, however, fees upfront are typically higher than other private money loans. The reason for this is that the investor knows the loan is not going to stay on their books for long, and the higher upfront fees can help to guarantee a return for them.

When pricing these types of loans, the cost quoted should not be the only variable you take into account. Customer service plays a big part in making these transactions successful. You are going to have to rely on someone else to disburse funds for your rehab project, and that person should be easy to work with, and easy to reach via email, phone or both. If you are having trouble communicating with your potential lender before a loan is made, it may be a good idea to find another group to work with before you have no choice but to deal with it!

If you have a short-term real estate project in California, and banks are not willing to finance it for you, now may be the time to look into your alternative financing options. If you are not accustomed to private money, you should be prepared for higher fees, but typically much less paperwork than a bank may require. The cost may be high, but it is certainly less expensive than a partner!

For those looking for more information on California hard money niche products, there is more available online, please visit our hard money loans page For more information.