Real estate experts say the hard money market in Los Angeles is becoming saturated, which may lead these private money lending companies to relax their standards. There are at least eight large companies in the Los Angeles region that will lend against residential and commercial real estate, but many other smaller businesses and individual investors have joined the crew. The smell of big money — a buoyant real estate market, rising interest rates, banks cutting back on loans — has prompted many big money lenders to jump into Los Angeles’ private money lending industry.
And they are doing it well. The latest edition of LA Weekly reports that the high end real estate market in Los Angeles is booming with the average price dropping from 5 million to 3 million. On the Malibu coast, prices hover around $10 million, while Beverley Hills is at $9.2 million and Pacific Palisades drops to $5 million. For local Angelenos who want a piece of this “hot” market, they want more than a cardboard box, but are turned away by their bank, there is only one way out. The private hard money lender. But the Los Angeles hard money loan market has grown, and with it comes the difficulty of knowing who to turn to.
If you are in that position, these ten factors will help you.
1. Experience – Experts advise that you choose a company that has been around for a long time and has a reputation for reliability and trust. Hard money loans typically come with increasingly complex origination, servicing, and investor relations regulations that must be met for compliance. The veteran investor is more likely to be able to skillfully negotiate a win/win scenario for all parties involved in the loan. His experience has given him this confidence and training.
2. specialize – Lenders who specialize in one or two types of loans are likely to be better for you than generalists who claim to handle all loans for all people. Specialists are more likely to have the in-depth and specific knowledge needed to help you choose the best loan for your situation.
3. with licence – Hard money lenders must be properly licensed by the Department of Corporations or the Department of Real Estate. Also look for the endorsements of the National Mortgage Licensing System on their websites.
4. Transparent – Lenders must be honest with you about all the details of the transaction. You should be able to have web-based access to relevant loan data during the origination process and you should be able to view the lender’s guidelines. If a hard money lender (also known as a bridging or private money loan) has interest rates, ask how to get those rates. There should be no ‘bait and switch’ tactics.
5. Briefcase – You will need advice on the selection of loans. Choose a company that has a rich portfolio of private and corporate investors. The more options you have, the better. This not only gives you loan alternatives, but also indicates that the business can pay back your capital.
6. Capital – Choose a company that indicates that it has more than enough capital. Private money lenders will not only lend to others, but may also give you long-term loans, up to seven years or more. You will need a company that can cover these loans. Ask around until you find one you trust.
7. Professional – The lender must tell you right away if they think they can’t provide the service. Look for loan programs on the website and beware of misleading advertising. The lender should also not change the terms at the last minute. Each of these factors indicates a lack of professionalism.
I also suggest you check out other resources, such as the lender’s website, LinkedIn or similar social media platforms, or articles the lender has written, etc. Check the reviews. See if the lender’s public image is professional and consistent.
8. Speed- One of the main reasons borrowers turn to hard money loans is speed: the chance to grab and change a “hot” project. Or the opportunity to finish construction before the deal dries up. Or the ability to get to the front of the line and seize that once in a billion opportunity. This is particularly important in today’s Los Angeles economic market, when housing inventory is low and prices are high. You will want to get there first. So you need a quick and fast loan.
The general private lender will accept you for a loan within 1-2 days. Some can even process your application that same day if they trust you. Do your shopping carefully.
9. Hire a lawyer – There are all kinds of money lenders some are more honest than others. Some give you loans legitimately and then increase the interest when you need to extend your terms or time. But others set onerous terms that force you to keep borrowing and paying ever-increasing interest. The best way to avoid this situation is to hire a lawyer to review all documents before you sign them. If you cannot afford to hire a lawyer, most bar associations have pro bono agreements. And depending on your age, the American Association of Retired Persons may be able to help you through its legal services network program.
10 Competitive rates and fees – Cheapness does not always demonstrate professionalism. Not the other way around. Sometimes an expensive lender can be a trick. But cheap rates are always attractive, and in a crowded market like Los Angeles, you’re more likely to find private lenders that offer competitive rates. Look for a reasonable rate, but also check out the other qualities so you end up choosing someone whose company makes you look like a hero.
How do you choose?
There are several ways to find a lender you trust. You can hire a broker. The broker knows the market and can use his connections.
You can also Google “hard money lenders” in your area or filter your network for resources. Other reliable options include talking to a mortgage company, title company, or real estate agency and asking for references.
In short, private lenders are growing rapidly in today’s Los Angeles market, making it even more difficult to know who to choose. There are too many who would like to help you.
Hopefully this article will help you find your pick!
