The type of investor to benefit from a loan program offered by a hard-money lender in Los Angeles are those investors who cannot qualify for the loan programs of a traditional bank. An investor with a value-add objective knows that the value created at the back end will justify the higher upfront fees and the rate charged by a hard-money lender at the front end.
The way to approach a hard-money lender in Los Angeles is as different as the loan platforms it offers. This blog will focus on the viewpoint of a hard-money lender and give advice and guidance on the approach. These guidelines will shorten the approval period and the path to the funding date.
The Applicant and the Hard-Money Lender
A hard-money lender seeks to loan to investors on projects that involve a fix-and-flip, or a value-add, over the short term. There are other projects where a hard-money loan will fit within the objective of a homebuilder on new construction or of a business owner with real estate as part of the capital assets. All deals will be evaluated with an entrepreneurial spirit not found with traditional lenders.
A hard-money lender will look for the creation of value with an experienced investor to meet the proforma.
The list below are some important aspects and requirements that need to be a part of the initial presentation.
- A detailed breakdown of all expenses. These expenses must include the purchase price of the property, the closing costs and the renovation costs accompanied by the scope of work.
- A confident and reasonable estimate of value after renovation.
- An appraisal to support the current value and the add-on value at the completion of the work scope.
- For the right deal with the right ratios, the initial quote could be between 80%-90% of costs.
The potential borrower needs to take care to prepare a complete proforma with renovation costs supported by estimates from a reputable contractor. The proforma needs to be based upon costs, not the actual value of the property nor the value to be created. If the proforma works on the basis of cost numbers and the deal is sound, then there will be room to negotiate for a higher loan ratio or a lower interest rate.
Questions an Investor Should Ask a Hard-Money Lender
Although it is typical for a potential borrower to feel like they are in an interview, and they are in a sense, it is expected and appreciated when the lender is asked questions. This portrays the investor as prepared, it solidifies the fact that the investor actually prepared the proforma and understands it, and demonstrates the command of knowing what it will take for the investment to meet the proforma.
Listed below are questions to consider posing to a hard-money lender.
- Based upon your preliminary review, what do you perceive as a range for the interest rate?
- Will there be an upfront fee and an exit fee?
- Can these fees be made a part of the loan?
- Can the monthly payments be interest only?
- What is the estimate of the loan term?
- Can the term be extended without a fee?
- How is my creditworthiness determined?
- What is your estimated amount of the loan?
- Are there any other pre-approval requirements or fees before I am considered a potential borrower?
- Is there anything else I should know about this loan program?
A dialogue based upon this line of questions will be the basis of an important and beneficial relationship.
To Learn More About How Hard Money Lenders in Los Angeles Can Help Fund Your Next Project Contact PB Financial Group Today
If you are an investor needing funding on a value-add transaction, then 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 provides quick funding since 2006 and has closed over 2,700 loans. Our objective is 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 value-add investment, please contact PB Financial Group at 877.770.3707 to schedule a consultation or visit www.CalHardMoney.com to learn more.
PB Financial NMLS #357614/DRE #01522495