Around 63% of people in the United States alone own some kind of real estate. Real estate, after all, is one of the most effective investments around. But if you're thinking about financing investment properties in California, you might be wondering where to start.
A hard money loan might be just what you need. But to get a hard money loan, you'll need to consider a variety of factors such as finding the right private money lender, choosing the right loan, and so on. Keep reading and learn more about where you should start with your real estate investment.
1. Choose the Right Lender
The first step of this entire process is to first find a good California hard money lender to help you out. There are many California private lenders for real estate out there, but that doesn't mean that they're all good options. You will also have to be careful when choosing because if you don't do your research ahead of time, you might accidentally choose a scammer instead of a real lender.
A real lender should want to help you and explain the details of hard money loans, the rates, and so on. The quality of the lender is also very important. If you find that the lender has a slow turnaround time or if the lender isn't ready to answer your questions, you might want to opt for a better and more efficient lender.
That way, nothing will slow you down when getting a hard money loan from private money lenders.
2. Collect the Right Documents
You won't be able to get very far in this process without the right documentation. Keep in mind that regular lenders and hard money lenders are not the same. For that reason, they usually won't want the same documentation.
Even so, you should still have all relevant documents on hand in case a hard money lender decides that he or she wants to take a look at them. Most likely, the lender will want to take a look at your tax records, records relating to the assessment of the property at hand, and so on. As long as you have all of these documents in order, you shouldn't have any problem dealing with the hard money lender.
If you don't have these documents on hand, get them together before you contact a hard money lender so you won't slow down the process.
3. Choose a Good Property
The last thing you want to do is waste your hard money loan on a mediocre piece of property. Instead, you will want to think long and hard about the property you plan on investing in. Choosing the right property can make or break your investment.
No one wants to invest in a piece of property only to see that property plummet in value soon after due to a detail that wasn't heeded. You also need to keep in mind that hard money loans are better for certain types of properties than others. It will only be a good idea to get a hard money loan for a property if you know you are going to make money on that property which you can then use to pay off the loan.
Of course, it can be difficult to predict which properties will increase in value ahead of time. Some properties such as those along the coast or in cities will almost always do this. Other California real estate investment options can be more unpredictable.
4. Don’t Forget About Deadlines
Many people forget or don't realize that hard money lenders often have deadlines or requirements that you must meet at a certain point. Hard money loans, in general, are much faster than traditional loans. Instead of having to wait for months at a time to get your loan, a hard money loan may go through in only a few weeks.
In some cases, it may only take days, so keep that in mind.
5. Should You Make a Real-Equity Contribution?
In most cases, you will need to make a real-equity contribution toward the property you plan on investing in. This is usually required due to the partnership you have with the hard money lender.
The downside of private lenders is that they usually require you to put down a relatively large chunk of money, sometimes as much as 30%.
6. Keep Your Credit in Good Shape
Try to keep your credit score in good shape before you get a hard money loan and also afterward. Having bad credit can make things much more complicated.
On the other hand, having good or very good credit can make things much easier for you, so keep that in mind. With good credit, you shouldn't have any trouble getting a hefty hard money loan.
7. Get a Higher Loan Amount
A higher loan amount will help you in a variety of ways. A higher loan amount will be particularly useful for financing more expensive properties.
Of course, you will need to have a very good credit report to have any chance of getting large loans.
8. Talk To Real Estate Professionals
Besides communicating with your lender, it is also important to talk to real estate professionals.
That way, you will have a better idea of the real estate market as well as different types of properties and how they perform over time.
Getting a Loan From a Private Money Lender
Getting a loan from a private money lender doesn't have to be hard, but there are certain factors you should consider. For example, you should choose the right lender, choose the right property, be aware of deadlines, and so on.
To learn more about hard money loans, click here.