As an experienced hard money lender in Los Angeles, the most important advice I can give to real estate investors is to not believe the ubiquitous stories from questionable sources on-line or on social media. The approach to any real estate investment needs to be methodical and thoughtful. A profit will never be the result if the numbers are not realistic and if the loan program does not meet the objectives of the investor.
Guidelines for a Successful Outcome:
Credit and Liquidity
As a hard money lender, I evaluate the merits of the deal first and the character of the borrower second. Having said this, those new to real estate investing should come to the table with good credit and liquidity. For those who have been investing for a while, I understand there will be nicks on the record and not every deal will be as profitable as forecasted. A transaction should improve the investor’s overall position, not exacerbate a problem. The potential of a good deal will not improve the merits of a failed investment.
Know When to Walk Away
Sometimes, the best decision is to walk away. A successful investor knows when to do this, and to do this without emotion. Although the purchase price is the first step in the deal, it is the last number calculated. A purchase price is backed into when the renovation budget is set and the loan terms are known. When the scope and costs of construction are known and fixed, and there is a term sheet issued for the loan, then the range of the purchase price can be determined. If the investment has to be held for too long past the holding period, and the purchase price is beyond the calculated range, then the numbers do not work. Walk away.
Listen to the Advice of the Team Members
Although the final decision does rest with the investor, the investor must listen to the advice given by the Realtor, the contractor, and the lender. An informed decision will be the collective knowledge of the team members and the value each member brings to the table. Therefore, the team members need to be trusted by the investor, and this trust will be appropriately placed if the team works cohesively. The respective inputs from the team members are not mutually exclusive. The numbers need to work for all team members, not just the investor.
Choose the Right Lender for the Deal
Often, a real estate investor and the proposed investment will not qualify for a traditional loan program. This is when the investor needs to look for a hard money lender offering a loan program that fits the proposed deal structure and under which the transaction and the investor will qualify. A hard money lender will fund higher into the capital stack. There needs to be strict attention given to the cost of capital throughout the holding period. Generally, the longer the investment is held, the lower the profit.
In my experience as a hard money lender in Los Angeles since 2006, I have made it my business to counsel real estate investors on how to become strong and secure borrowers confident in their decisions.
If you are interested in purchasing real estate or need funding for your next project, you need to work with a reputable and respected hard money lender in Los Angeles. PB Financial Group is a premier direct hard money and bridge lender who has been providing quick funding since 2006, and who has funded over 2,700 hard money/private money loans. Our objective is to work to satisfy your financing needs on important real estate projects throughout California in an efficient manner.
To learn more about how to successfully finance your next real estate venture, please contact PB Financial Group at 877.700.3707 to schedule a consultation or visit www.CalHardMoney.com to learn more.
PB Financial NMLS #357614/DRE #01522495