Hard Money Loans: California Investors?

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Hard Money Loans: California Investors?

Joffrey Long
Lender · Los Angeles, CA · Member since 2012 · 147 posts · 76 votes

Here's my "take" on the market - and my question:

Will hard money continue to get cheaper? We see a continual pattern of huge amounts trust deed investment dollars chasing a smaller number of loans.

Rates in the single digits, costs near as low as what banks charged, and longer term loans. The old "Limbo Dance" comes to mind: "How low can you go?" (If you're too young to remember that, it's probably a good thing.)

Real Estate investors who bought when prices were much lower, (about 18 months ago here in Southern California) are selling/taking profits. Some of that money is chasing trust deed investments as well - driving rates and costs even lower.

Investment property buyers who can't or don't have 3 months to jump through the bank's hoops to try to get their loan are taking advantage of today's lower costs from hard money lenders. People using hard money loans for investment properties are sharp - we've got to have terms that make ssnse.

So my big question(s): Do you see an increase in any of the following? Hard money loans offered at single digit rates, longer terms and lower costs? Trust deed investments offered at lower yields? Or an increase in the use of hard money financing for investment purposes?

(I'm only talking about NON-OWNER occupied properties, not financing someone's residence.)

Look forward to your feedback!

Joffrey Long

P.S. When hearing the mention of "hard money," some feel compelled to mention "loan to own," where a lender merely loans with the hope of foreclosing. Wrong-O ! That's a pretty "1980's" business model - but especially dangerous with 2013's new investor and borrower protection laws.

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Rick H.
Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
13y

Ok, here are a few more thoughts on the subject:

If you market to niches that you really understand and even sub-niches within the larger categories, you can become the dominant player, irrespectively of your size and relative access to capital.

If you have expertise in solving specific kinds of problems, as a hard money originating lender, you can close faster.

If you actually have you own money (or at least a credit or warehouse line) you can close still faster if you so choose, and outperform other wouldbe competitors.

If you own a loan and you now wish to broker it, flakey note investors' failure to perform won't affect you as much.

If you have good relationships with your competitors, you are less likely to have deals biked from you.

When I was ill during 2009-2010, I referred 100% of my business to my longtime friend and main competitor. I even funded most of those deals with my money! Consequently, we have an incredible trusting relationship that is mutually beneficial. And when something now happens in the marketplace or legislation, I have a sympathetic ear to discuss the potential ramifications.

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  • Joffrey Long
    OP
    Lender · Los Angeles, CA · Member since 2012 · 147 posts · 76 votes
    13y

    Amir,

    Love your comment, "lower my rate for professional / reliable borrower/rehabber." I've had to lower my rates even for irresponsible and unreliable borrowers!

    My "how low can you go, Joffrey?" is my apartment hard money first at 7.499%, no points, no fees, and we pay borrower's title, escrow, recording, notary fees and lunch the day of doc signing! .......and happy to do it!

    I have to share the greatest line I ever heard to convince investors who need to be trained to accept rates that are realistic, it's from my friend Ron Bedell, who said, "Bernie Madoff taught us we can't get 12%."

    I fund about 100% of the hard money loans I do w/ my own money - about 40% of them are "saleable" quality - andare sold to inestors, the other 60% are "not saleable or not suitable" for my private investors and they are the higher risk / higher yield loans I keep. Highest rate I ever get, even on a risky deal that only I would take is about 9.9

    Joff

    0Reply
  • Hans Restuccia
    Real Estate Lender · Miami, FL · Member since 2013 · 243 posts · 24 votes
    13y

    Joffrey Long- fantastic forum!! I will comment on what is happing in South Florida as soon as I finish 2 closings for today.

    0Reply
  • Joffrey Long
    OP
    Lender · Los Angeles, CA · Member since 2012 · 147 posts · 76 votes
    13y

    Hans,

    How are those 2 closings going? We're looking for that Florida report !

    Joff

    0Reply
  • Hans Restuccia
    Real Estate Lender · Miami, FL · Member since 2013 · 243 posts · 24 votes
    13y

    Joffrey Long- I love it!! One closed and disbursed and finishing up the 2nd now.

    1 was for $150K- 3 years, no pre-pay @ 13%
    The 2nd is for $125K- 5 years, no pre-pay @ 13%

    Thanks!!

    0Reply
  • Hans Restuccia
    Real Estate Lender · Miami, FL · Member since 2013 · 243 posts · 24 votes
    13y

    Joffrey Long Ha ha- u da man!!

    I will be commenting on your excellent discussing above soon.

    0Reply
  • Hans Restuccia
    Real Estate Lender · Miami, FL · Member since 2013 · 243 posts · 24 votes
    13y

    K. Marie Poe- we offer 10% w/ backed by an assignment in the note and mortgage on South Fla real estate and a personal guaranty! Let me know if you have any interest.

    Sorry if that broke rules- but truly think it is education and germane to the discussion.

    0Reply
  • Hans Restuccia
    Real Estate Lender · Miami, FL · Member since 2013 · 243 posts · 24 votes
    13y

    Joffrey Long

    From Joffrey: Here's my "take" on the market - and my question:
    Will hard money continue to get cheaper? We see a continual pattern of huge amounts trust deed investment dollars chasing a smaller number of loans.

    Comment from Hans: I am seeing that also- but not reliable source of funds to close quick and aggressive.

    Rates in the single digits, costs near as low as what banks charged, and longer term loans. The old "Limbo Dance" comes to mind: "How low can you go?" (If you're too young to remember that, it's probably a good thing.)

    Comment from Hans: We are not seeing single digits here in Fla yet but there are private small time investors, (aunt Mildred types), coming into the market at 10% no points or low points- however, they are slow, require too much stuff, cant close and are not aggressive enough. Nevertheless, they are hurting us at our 12.5% to 13.5% loans starting at 4 points because, even though they cannot close near as aggressively, they poison the well for our higher costs if you know what I mean.

    We are closing deals every week starting at 12.75% to 13.5% and starting at 4 points for 3 to 5 years. But we have several brokers bringing us deals for people who really need to close fast and may have some problems. They know we can do it and sell our higher rates.

    And, we are extremely aggressive in getting it closed, no application fees, we do our own CMA and require no appraisal, no credit, no pre-payment penalty, no escrow of taxes, no upfront fees, we will do construction draws on a weekly basis and are not afraid of rough property. And, most importantly, we can also close tomorrow!!!

    Example- closed a deal today for a first time borrower for us- he had better rates from a small private lender but stood there and told us the small lender was too slow- does not return calls, etc. We got the loan, $125K, 13%, 5 points- (part of that was to the broker who brought us the deal), and no pre-pay penalty. We inspected the property on Monday and we closed today- that is less than 3 days.

    The guy is now bringing us all his deals.

    These people need to close so what is a couple points in the interest rate if they cannot close.

    We do not have a hard time placing our money but are always looking for deals.

    We also closed a $150K at 13% and 4.5% points for 5 years.

    Year to date we have closed over $3 million- I wish it were more- but have not had to go down yet.

    0Reply
  • Amir Levi
    Hard Money Lender · Los Angeles, CA · Member since 2013 · 33 posts · 9 votes
    13y

    I am amazed at how high the rates are in FL.
    In Los Angeles I have a hard time getting more than 10% lately.
    Am funding a commercial prop now, 50% LTV, at 10% and no points, and borrower keeps haggling with me :-)

    Amir

    0Reply
  • Tom La Rosa
    Long Beach, CA · Member since 2014 · 35 posts · 1 vote
    12y

    Hi, Im a green Noob, looking to get started  rehabbing / flipping in Southern California. I want to know what I need to get a hard money loan. What documents, etc. ?

    This forum is very advanced, but I cant find the info Im looking for.

    I have a 401K ( not huge ), equity in my house, a couple bank accounts, great credit, Im a Licensed Electrician with lots of construction experience.

    Im reading a lot and a bit overwhelmed, Ive found the Norris Group online, but Im not sure where to begin.

    Im mainly interested in buying and holding, but will do whatever it takes to get started.

    I could use a mentor or a partner or any advice you may have.

    Thanks

    0Reply
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