Hard Money Lenders in California

Have you ever considered investing in real estate but lacked the funding from traditional lenders? Or perhaps you’re a real estate investor looking to expand your portfolio quickly. If so, you may want to explore hard money lenders in California.

Hard money loans provide an alternative source of funds for those who can’t qualify for traditional financing. They help real estate investors and flippers access properties to rehab and resell quickly. Let’s explore how the process works.

Applying for a Hard Money Loan in California

To obtain a hard money loan in California, here are the standard steps:

1. Find a Lender – Many private lenders are operating in California that specialize in hard money loans. Research lenders online, ask for referrals from other investors, or attend local real estate meetups.
2. Submit Loan Application – Provide information on the property you want to purchase or rehab, projected rehab costs, timelines, credentials/experience, and financial details.
3. Property Appraisal/Evaluation – The lender will hire an independent appraiser to assess the property’s current “as-is” value. This determines the maximum loan amount based on LTV ratios.
4. Underwriting Review – The lender reviews your application, credit reports, background check, and other supporting docs to evaluate risk factors.
5. Loan Approval/Closing – If approved, you’ll sign loan documents, provide additional collateral like a personal guarantee, and then receive funds within 1-2 weeks typically.
6. Renovate and Resell – Use loan funds to purchase, rehab, and improve the property within the loan term. Pay off the loan and interest when the property sells.
7. Extension Request (If Needed) – In rare cases, you may qualify to extend the loan term if resell is delayed unexpectedly. But extensions incur additional fees.

That sums up the basic process for obtaining a hard money loan from start to finish. Keep in mind timelines and requirements can vary between lenders, so it pays to shop around. Now let’s consider some key factors in determining whether it’s the right financing solution.

Factors to Consider with Hard Money Loans

As with any loan product, hard money comes with pros and cons to carefully weigh, given your specific situation. Here are some of the major factors:

Upside

• Fast approvals – Hard money lenders typically provide funding decisions in 1-2 weeks versus 6+ weeks for conventional loans. This allows quicker turnover on rehab projects.
• No credit score/income requirements – Unlike bank loans, hard money lenders review the property and collateral rather than relying on credit. This opens financing to most applicants.
• Less red tape – The application process is more streamlined without the voluminous documentation of income, assets, and employment history required by banks.
• No prepayment penalties – Borrowers face no fees if they repay the loan early by selling the property and using sale proceeds.

Downside

• Higher interest rates – Rates tend to be 8-15% or higher versus 5-7% APR for conventional loans. This drives up total repayment costs.
• Shorter terms – Typically 6-36 months versus 30+ years for mortgages, limiting timelines to rehab and resell properties. This increases time pressure.
• High fees – Upfront fees from 1-3% plus ongoing interest payments add to repayment obligations. These deepen loan size.
• Foreclosure risk – Defaulting on payments can result in the lender foreclosing on the real estate property used as collateral. This risks losing your investment.
• No mortgage write-off benefits – Hard money loans are not considered by the IRS to be primary mortgages used to purchase a property. Thus interest payments cannot be deducted for tax benefits.

Carefully assessing these pros and cons can help determine if a hard money loan aligns with your real estate investment strategy, risk tolerance, and timeline. For some, it provides the only financing solution; others may prefer waiting on better options.

Characteristics of Quality Hard Money Lenders

Now that we’ve covered the key aspects of hard money loans let’s explore what separates quality hard money lenders from the rest and how to identify the best options. Here are five important characteristics:

Industry Experience

The most reputable lenders have been active in hard money financing for many years through multiple real estate cycles. Extensive experience allows them to accurately evaluate risk and structure responsible loans. Avoid startups with little track record.

Repeat Clients

Look for lenders with large volumes of repeat business and referral endorsements from experienced investors. This demonstrates satisfied previous borrowers who found the terms fair and experience professionally managed.

Flexible Underwriting

Rigid lenders will reject more applications due to narrow guidelines. Find companies open to creativity and alternatives if required documentation is unavailable. Flexibility allows for more approvals.

Streamlined Process

Reduce stress by using a lender whose application and funding process requires minimal forms and documentation with fast turnaround times from application to funding. Efficiency saves time and headaches.

Personal Relationships

The best hard money partners make borrowers a priority, fostering ongoing communications through difficult rehab periods. Search for those valuing long-term client connections over one-off transactions.

By going with a hard money lender adhering to these quality standards, borrowers gain an informed, reliable ally, seeing their investing success as mutually beneficial. Let’s explore top providers meeting such needs.

Recommended Hard Money Lenders in California

Now that we’ve covered all the important considerations, here are some top-rated, recommended hard money lenders currently operating in California:

1. Hard Money Connect

• Over $1 billion funded in CA since 2010, helping thousands of investors.
• Fast 1-week approval process after fully-guided online application.
• Variable interest rates from 8-15% depending on risk factors.
• Lends up to 80% LTV based on conservative “as-is” appraisals.
• Personalized client service from dedicated account representatives.

2. Five Star Lending

• Family-owned business with 20+ yrs experience lending in CA.
• Flat 10% interest rates, no matter loan size, lowered risks.
• LTV up to 75% with flexible terms of 6-36 months.
• Streamlined online application gets most approvals in 1-2 days.
• Efficient funding is dispersed within five business days of closing.

3. Pacific Private Money

• Over $300 million has been lent to investors since 2008.
• Fast pre-approvals based on submitted asset and income details.
• Variable rates 8-12% with 1-3 points, risk-adjusted by loan size.
• Terms tailored to project needs with 1-year extensions available.
• Personal service from partners licensed to lend in multiple states.

4. LoanMe

• Online lenders provide hard money loans nationwide.
• Fast e-app process, most funding within five days if all terms are agreed.
• Flexible 6-36 month terms at rates averaging 10-12% APR.
• Streamlined approval for loans up to $500k using property as collateral.
• Easy repeat business for borrowers building positive repayment history.

5. Premier Capital Funding

• Family-owned business lending since 1981 in Southern California.
• A personal advisor leads each borrower through the process.
• Rates begin at 10% for loans up to 60% LTV for purchasing and rehabbing residential properties.
• Interest-only payments on 12-36 month terms allow focus on renovations.
• Strict 70% LTV cap on commercial loans at rates starting from 12%.
• Reputation for flexibility if borrowers encounter issues during renovations.
• Repeat and referral borrowers get preferential rates after proving their track record.

That covers the highlights of some leading hard money lenders active across California. Now that you understand the financing product and top providers let’s review some commonly asked questions from prospective borrowers.

FAQ about Hard Money Loans in California

This section addresses five frequently asked questions:

1. How quickly can I get approved and funded?

If all application documents are complete and in order, most reputable lenders can provide pre-approval within 1-2 weeks. Full funding is typically 1-2 days after signing final loan docs. But timelines depend on property specifics and lender workload.

2. What is the maximum loan amount available?

Loan sizes vary by lender but typically range from $50,000 up to $2 million. Loan amounts are based on the property’s as-is appraisal value multiplied by the lender’s maximum allowable LTV percentage, usually 60-80%.

3. Can I get a loan for fixing and flipping a property?

Yes, hard money is commonly used for “fix and flip” investments where the loan funds acquisition and rehab, to quickly resell at a profit. Lenders understand these short-term investing strategies.

4. How long do I have to repay the loan?

Most hard money loans provide 6-36 months to complete the project and repay the loan. Some lenders may offer extensions for a fee if unforeseen delays occur. But terms depend on the lender and specific underwriting of your situation.

5. Will taking out a hard money loan affect my credit?

Hard money lenders do not report payments to credit bureaus like traditional lenders. So while incurring a large debt, making timely payments will neither help nor hurt your credit scores when repaid as agreed. Credit is not a factor in approval either.

With any other pressing questions, be sure to consult directly with prospective lenders. Having done extensive research will set informed borrowers apart, seeking the best funding options and terms.

Conclusion

In conclusion, hard money lenders fill an important niche for real estate investors and developers needing quick access to funds outside traditional financing constraints. By properly understanding this alternative loan product and proven providers, borrowers can make prudent investment decisions aligned with their goals.

While not for every scenario due to high costs, hard money remains an invaluable tool fueling real estate deal flow. With care, diligence, and expertise, it helps unlock properties for savvy buyers to create value through renovations and reselling.