Types of Real Estate Transactions That Involve a Hard Money Lender

When someone is looking for a hard-money loan, one of the most common questions asked is, “will my targeted real estate purchase qualify or attract interest from a hard-moneylender?” This is an important, and valid, question that warrants a detailed response.

To be clear, a hard-money loan can be secured for virtually any real estate transaction. For example, a loan could be secured for the purchase of a single-family home, a multifamily residential property, commercial real estate, etc. Though, it is worth noting that the vast majority of hard-money loans in Los Angeles, and elsewhere, are issued as mortgages for residential property purchases.

Fix-and-Flip

One of the most popular real estate transactions that are financed via hard-money loans are fix-and-flip projects. The loans are typically utilized to purchase residential property with a specific objective to update the home, then put it back on the market for a profit.

Unique Properties Will Present Challenges

It may prove challenging to locate a reputable hard-money lender who is willing and able to provide a loan for other types of property, such as:

• Land purchases;

• Industrial property (e.g., steel mill);

• Churches;

• Restaurants

A good rule of thumb is that the more unique the property is, the more difficult it will likely be to locate a respected and reputable lender who is willing to provide a loan for the purchase. Why? Because most lenders are generally interested in providing support on properties that will more readily sell. This helps ensure the lender will get their funds back sooner rather than later, even if the borrower suddenly decides to back out of the project or is unable to service the loan payments.

Hard Money Loans for Estate Sales

Even though it is more challenging to locate a reputable lender for more unique real estate transactions, it is worth noting that if you have identified a property on the market being sold via an estate sale, you could potentially secure a loan in Los Angeles and elsewhere with less obstacles compared to, let’s say the purchase of a restaurant. This is because some hard-money lenders can also provide loans while an estate is going through the probate process. This is an important service since, in many instances, the surviving heirs may need to borrow funds in order to settle outstanding debts and obligations that have attached to the estate of a deceased loved one. Hard-money lenders can provide a loan secured by the real estate property that is going through probate. It is important to highlight the fact that this type of assistance is typically not offered by traditional lenders such as a credit union or bank.

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Tips to Help Ensure Your Hard Money Loan Is Approved

You have located a property that is the proverbial “diamond in the rough.” The purchase price is incredibly reasonable and with the right updates and improvements, the property could be flipped for a substantial profit. This all sounds great, but you suddenly realize – how can I afford to buy the property and fix it up?

Enter a hard money loan. This is a fantastic option if you need to secure funds quickly to close on a major real estate purchase.

It is in your best interest to take a moment and consider how you plan to present your project to a hard money-lender in Los Angeles, as there are certain steps that need to be taken when applying for a hard money loan.

Tip No. 1 – Submit a Detailed Personal Financial Statement

Private lenders in Los Angeles and elsewhere in California typically aren’t as concerned about your debt-to-income ratio as a traditional bank lender. Nevertheless, it is still worthwhile to demonstrate to the lender that you are fully capable of paying back the borrowed funds. While creating your personal financial statement, make sure to check your credit score and credit report to note any considering issues or red flags. For example, if you have a prior bankruptcy, foreclosure, or other bad debt, make sure to include a summary of what occurred, lessons learned, etc.

Tip No. 2 – Create a Prospectus that Outlines Your Experience in Real Estate and/or Other Business Ventures

Hard money lenders are more inclined to approve a loan application from someone who possesses actual experience in real estate investing, fixing and flipping homes, etc. Nevertheless, if do not have any experience in this area, do not fret. Take the time to explain your professional background and experience with other business ventures and projects.

Tip No. 3 – Be Transparent and Honest

Transparency is absolutely essential when applying for a private loan. Make sure to submit all of the requested documentation to the lender and be honest about any potential issues with the property that is going to be purchased with the loan funds. Transparency is critically important because you will work directly with the decision-maker rather a middleman at your local bank. This is why developing trust is so incredibly important in these types of transactions.

Tip No. 4 – Establish a Coherent Narrative as to Why Your Loan Application Should Be Approved

Make sure your application is coherent and comprehensible. This is especially true for the portion of the loan application where it asks for financial projections. If a hard money lender cannot understand your accounting logic and there does not appear to be a realistic path to profitability, then your hard money loan in Los Angeles could be denied.

If you have identified an investment property with tremendous upside potential, consider reaching out to the expert hard money lender in Los Angeles to help turn your investing dreams into a reality.

Posted in Uncategorized | Comments Off on Tips to Help Ensure Your Hard Money Loan Is Approved

Tips to Help Ensure Your Hard Money Loan Is Approved

You have located a property that is the proverbial “diamond in the rough.” The purchase price is incredibly reasonable and with the right updates and improvements, the property could be flipped for a substantial profit. This all sounds great, but you suddenly realize – how can I afford to buy the property and fix it up?

Enter a hard money loan. This is a fantastic option if you need to secure funds quickly to close on a major real estate purchase.

It is in your best interest to take a moment and consider how you plan to present your project to a hard money-lender in Los Angeles, as there are certain steps that need to be taken when applying for a hard money loan.

Tip No. 1 – Submit a Detailed Personal Financial Statement

Private lenders in Los Angeles and elsewhere in California typically aren’t as concerned about your debt-to-income ratio as a traditional bank lender. Nevertheless, it is still worthwhile to demonstrate to the lender that you are fully capable of paying back the borrowed funds. While creating your personal financial statement, make sure to check your credit score and credit report to note any considering issues or red flags. For example, if you have a prior bankruptcy, foreclosure, or other bad debt, make sure to include a summary of what occurred, lessons learned, etc.

Tip No. 2 – Create a Prospectus that Outlines Your Experience in Real Estate and/or Other Business Ventures

Hard money lenders are more inclined to approve a loan application from someone who possesses actual experience in real estate investing, fixing and flipping homes, etc. Nevertheless, if do not have any experience in this area, do not fret. Take the time to explain your professional background and experience with other business ventures and projects.

Tip No. 3 – Be Transparent and Honest

Transparency is absolutely essential when applying for a private loan. Make sure to submit all of the requested documentation to the lender and be honest about any potential issues with the property that is going to be purchased with the loan funds. Transparency is critically important because you will work directly with the decision-maker rather a middleman at your local bank. This is why developing trust is so incredibly important in these types of transactions.

Tip No. 4 – Establish a Coherent Narrative as to Why Your Loan Application Should Be Approved

Make sure your application is coherent and comprehensible. This is especially true for the portion of the loan application where it asks for financial projections. If a hard money lender cannot understand your accounting logic and there does not appear to be a realistic path to profitability, then your hard money loan in Los Angeles could be denied.

If you have identified an investment property with tremendous upside potential, consider reaching out to the expert hard money lender in Los Angeles to help turn your investing dreams into a reality.

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