Real estate experts note that the hard-money market in Los Angeles is getting crowded, which may lead these private money lending companies to loosen their standards. There are, at least, eight major companies in the Los Angeles region that will lend against residential and commercial real estate, but many other smaller companies and individual investors have joined the crew. The smell of big bucks – a splendid housing market, rising interest rates, banks cutting down on loans – has caused lots of hard money lenders to jump into the Los Angeles private money lending industry.
And they’re doing well. The latest edition of LA Weekly reports that the high-end housing market in Los Angeles is booming with the average price being pushed down from 5 million to 3 million. In Malibu Coast, prices coast near $10 million while Beverley Hills is $9.2 million and Pacific Palisades dips the lowest for $5 million. For local Angelenos who want a share of this ‘hot’ market, want more than a cardboard box, but are rejected by their bank – there’s only one way out. The private hard money-lender. But the LA hard money lending market has swelled and with it comes the difficulty of knowing whom to turn to.
If you’re in that position, these ten factors will help you.
1. Experience – Experts advise that you choose a company that has been around 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 need to be adhered to for compliance. The veteran investor is more likely to be able to skillfully negotiate a win/win scenario for all parties involved with the loan. His experience has given him this confidence and training.
2. Specialize – Lenders that 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 that is necessary to help you choose the best loan given your situation.
3. Licensed – Hard money lenders should be properly licensed with either 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 should be upfront with you about all 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 see the lender’s guidelines. If a hard money-lender (also known as bridge or private money lending) has ‘teaser’ rates, ask how to get those rates. There should be no ‘bait and switch’ tactics.
5. Portfolio – You’ll need advice in loan-selection. Choose a company that owns a rich portfolio of private and company investors. The more options you have the better. This not only gives you alternatives for loans but also indicates that the company can afford your capital.
6. Capital – Choose a company that indicates it has more than enough capital. Private money lenders will not only be lending to others but also may be running long-term loans for you – as many as seven years or more. You’ll need a company that can cover these loans. Ask around until you get one that you trust.
7. Professional – The lender should tell you right away if he or she thinks that he can’t service you. Look for loan programs on the website and be wary of misleading advertising. The lender, too, should not change the terms at the last minute. Each of these factors indicates unprofessionalism.
I also suggest that you check other resources such as the lender’s website, LinkedIn or similar social media platforms, or articles that the lender may have written and so forth. Check reviews. See if the lender’s public image is professional and consistent.
8. Speed – A prime reason that borrowers approach hard money loans is speed – the opportunity to grab and flip a “hot” project. Or the chance to finish the construction before the deal dries. Or the ability to get in front of the line and snatch that one-in-a-billion opportunity. This is particularly important in today’s economic market in Los Angeles when the housing inventory is crimped and prices are high. You’ll want to get there first. So you need a fast and speedy loan.
The general private money-lender will accept you for a loan within 1-2 days. Some may even process your request that same day if they trust you. Do your shopping carefully.
9. Hire a lawyer – There are all kinds of money lenders of which some are more honest than others. Some legitimately give you loans and then hike the interest when you need to extend your terms or time. But others set onerous terms that force you to continue to borrow and to pay increasing amounts of interest. The best way to avoid this situation is to hire an attorney to review all documents before you sign them. If you can’t afford to retain counsel, most bar associations have pro bono arrangements. 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 show professionalism. Nor the reverse. Sometimes an expensive lender may be a hack. But cheap fees are always attractive, and in a glutted market like Los Angeles you are more likely to find private money lenders who offer competitive prices. Look for a reasonable rate – but also review the other qualities so that you end up choosing someone whose company makes you look like a hero
How do you choose?
There are various ways that you can land a money-lender that 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, a title company, or a real estate agency and asking for references.
In short, private moneylenders are growing apace in today’s Los Angeles market making it all the more difficult to know who to choose.There are too many out there who would like to help you.
Hopefully, this article helps you dig your pick!