Long Beach Real Estate-Long Beach Condos

Hard money lending is exactly what it sounds like; loans that are hard to do.  Many borrower's needs fall out of the mainstream loan guidelines and they often need a "short-term" fix.   Long Beach homeowners who need money, and don't qualify under existing bank or mortgage company guidelines may find this article helpful.

A private loan is essentially someone with a lot of money ,lending to someone who needs it ,and who can't get it from banks or mortgage companies.  Most of my investors are older, retired, well-heeled, and smart.  I have learned more about "true" underwriting in the past few years than I have in all my years in business..  Investors are sharp and know how to mitigate loss.  They are also quirky and their quirks tend to match up with their life experiences.

Let me give you some examples where hard money loans are appropriate and the type of investors I match up with the loan:

1- Multi-family:  Most banks or commercial lenders will not lend over 55-60% on multi-family in Southern California.  The Debt Service Coverage ratio (DSCR) isn't there.  In short, the rents don't cover the monthly debt service and expenses.  I have three investors who made a living owning and managing apartment complexes.  They know the "secrets' to undervalued properties that are being leased at below-market rates.  They'll lend up to 75% on those properties if they have a decent borrower.  

2- Investor Seconds:  Many investment properties have low fixed-rate loans on them and the owner does NOT want to refinance a 5.25% first just to get money out of the property.  Oftentimes, the investors are "stated-income" borrowers that couldn't get a second mortgage on the investment property.  Maybe they just need $50K for some repairs.  They'll pay 12% for that money.  I have seasond investors that understand that challenge. 

3- Small Builders:  Small builders are taking it on the nose this year!  Their materials costs skyrocketed. They have "runout of money" on their traditional construction loans and are 80-90% completed.  They need maybe $100K to get the over the hump, finish the property and get it sold.  I have retired builders, as investors, who will look at the property, analyze the costs overrun and lend  the money for a year at 15% with no payments (interest accrues).

4- Small Business Owners:  Many times the small business owner can't get a quick loan on his property because his credit scores have dropped.  One borrower owns a trade show company.  He got a job to furnish point of sale machines for 500 attendees.  The problem?  The macjines costs $500 a pop.  He was making close to $700 for the convention so we knew he'd have the money.  A retired restauranteur knew that sometimes you have to bite the bullet and pay the costs for equipment.  We knew the loan would be for 5-6 months.  We bought the machines for him, executed a lease buyback for $540/machine, and recorded an deed of trust on his home for $250,000.  My borrower got the machines and made $160/machine on the convention.  The investor made a 12% yield on a combination equipment finance/deed of trust.

5- Recent Bankruptcy:  We loaned 70% to a physician who was 6 months out of BK.  The seller carried the 30% balance and the doctor got the house.  We knew the worst was behind him (with the BK) and thought he could refi in a year.  The investor made 10% on his money, the seller got his price, and my borrower refied out of the loans in 18 months. The investor, a retired physician, understood how managed care wreaked havoc on general practitioners in San Diego.  He recognized my borrower's move to "cosmetic surgery" as a creative approach to make his practice profitable.

Private Money Lending can be helpful to Long Beach homeowners who "don't fit in the box".  We always pretend that we are lending our mother's money; we have happy investors, relieved borrowers, and a great business because of that practice.