The drop in real estate prices has left the door open for investors to make an incredible amount of money – the only keys are financing and timing! Investment properties are everywhere for savvy buyers, but as if to highlight some cosmic folly, the lenders simply aren’t interested in offering assistance. Down payment increases alone are enough to drive anyone crazy, which is why many property investors are turning their attention to hard financing. When it comes to hard money loans, California, for example, is seeing a massive spike in use, as they offer an incredible amount of flexibility for the buyer, while limiting the amount of risk for the lender. In situations like these, money can be made by everyone, which is why those that have capital are offering it up, and those that need it are staking their claim!
Using the “Bridge Loan”
Real estate investors are often stretched quite thin, as their capital is tied up in various properties across a region. This can be frustrating when you have one or two properties for sale, yet find the perfect investment for your next venture. Where do you turn for financing? The bank will turn you away more times than not, and those that are even willing to listen will drag their feet until the opportunity has passed. “Bridge loans”, as they are often called, can help the investor bridge the gap between the sale of a currently owned property and the purchase of a new one. Once the already owned property sells, the bridge loan can be repaid in full, and the investor is now the proud owner of a new piece of real estate! In this arrangement, the lender enjoys a nice return on the loan, while the borrower gets what they need to facilitate another acquisition.
Hard money California lenders will often offer up about 70% of the property’s market value, which often takes borrowers aback upon learning of the loan amount. However, this is simply a way to hedge their risk a bit, and because the bridge loan is only temporary, it should be more than enough to facilitate a sale and buy the investor the time he or she needs to pounce on a great opportunity.
With the capital in hand, the investor can now make modifications to the home, turning it into an attractive location for rent or purchase, which opens the door to profits. The flexibility comes into play, as the bridge loan can now be refinanced to cover the full amount of the property and repairs, buying the investor even more time to sell it. While others are finding themselves “upside-down” in property upon purchasing it, the use of hard money loans allows an investor to be “in the black” from the moment they take on the new property!
When it comes to finding hard money lenders, California has a variety of options. By utilizing them, you can pounce on great real estate opportunities and turn the current economic downturn into a positive for your net worth!