If you are trying to jump into the real estate market in California, especially in the city of San Diego and Los Angeles, then this ultimate guide on hard money loans in San Diego is only for you.

The real estate market in California, especially in Los Angeles and San Diego, has been booming in recent years. Individuals with capital can jump into this market without facing that much problem. But what about those who do not have enough money to invest? Does that mean they will lose the opportunity? Of course not! A hard money loan can give you that boost you need to jump into this market. To clear your concept about Hard money loans in San Diego, we present you with an ultimate guide that will help you to kick start your career as an investor in the real estate sector.

 

What exactly is a hard money loan? 

Private lenders offer a short term loan that is secured by borrowers’ real estate assets. Here, the lender can be an individual or a group of individuals, basically a non-traditional lender. The term for a hard money loan is generally from 12 months to up to 5 years. Generally, a traditional bank takes almost one month to process your loan application. When approved, It also takes some more time to transfer funds to you. Unlike conventional mortgage loans or traditional banks, hard money loans process the loan application faster and transfer you the fund within two weeks. However, interest rates are higher as compared to traditional banks. The interest rate on private loans varies from lender to lender and generally ranges between 10-14%.

Why is a hard money loan a good option for real estate investors? 

A hard money lender has the capital to fund your real estate project easily and quickly. You don’t have to go to the bank, apply for a loan, wait for the loan approval, and finally get the funds almost after 30 to 45 days. As a real estate investor, you have to act quickly. You don’t have enough time to run to the bank and wait for a long time.

Traditional banks require your credit score and other documents to process your loan application. On the other hand, private money lenders only focus on the current value of your property that is going to serve as collateral. They emphasize more on collateral because, in case of default, they can get their money back by reselling the property. Your credit score and other documents that are required by conventional banks, do not matter that much for a hard money loan. What matters the most is the current value of the collateral and expected ROI.

If you don’t have enough funds and time or your credit score does not match with the requirements of a traditional bank or in case you are not able to take a loan from a traditional bank, a hard money loan in San Diego can be the best option.

How to find the best hard money lender in San Diego? 

You can start searching for hard money lenders in San Diego on the internet. Search engines may help you to find the list of almost all the reputed private lenders in your area. Try to contact several lenders and select some of the best hard money lenders among them. Selection of the best hard money lender in San Diego can be based on customer review, their past deals and a trustworthy track record in the industry. 

Before you approach a hard money lender, do thorough research on the property that you are going to present before him. You have to put a loan proposal before him with the following details:

  • The Property Address
  • Estimated Purchase Amount
  • The Total Loan Amount You Need (purchase and repairs)
  • Property Photos
  • Plans for the Property
  • Your Budget and Plans After Property is Ready to Sell

Putting this kind of well-researched loan proposal increases the chances of your loan approval.

Points to be considered before applying for a hard money loan – 

The most important point is that you keep your asset as collateral while signing the agreement for a private loan. This way you put your assets at risk. In case if you are not able to pay the loan according to those terms on which you and the lender had agreed upon, you will likely lose your assets or be brought by the court.

Also, keep in mind that the repayment schedule is short and the interest rate is higher. The hard money lender in San Diego also requires a down payment of 25-30%.

So before diving into the real estate market, you must have a basic understanding of private loans. While a hard money loan in San Diego can make you a successful real estate investor in the City, it can also get you in trouble if you do not understand every aspect of it.