You have located a property that is the proverbial “diamond in the rough.” The purchase price is incredibly reasonable and with the proper updates and upgrades the property could be traded for a substantial profit. This all sounds great, but suddenly you realize: how can I afford to buy the property and fix it?
Enter a hard money loan. This is a great option if you need to secure funds quickly to close a major real estate purchase.
You should take a moment and consider how you plan to present your project to a hard money lender in Los Angeles, as there are certain steps that need to be taken when applying for a hard money loan.
Tip No. # 1: submit a detailed personal financial statement
Private lenders in Los Angeles and elsewhere in California are generally not as concerned about their debt-to-income ratio as a traditional bank lender. However, it is still worth showing to the lender that you are fully capable of repaying the borrowed funds. When creating your personal financial statement, be sure to check your credit score and credit report to note any serious issues or red flags. For example, if you have a previous bankruptcy, foreclosure, or other bad debt, be sure to include a summary of what happened, lessons learned, etc.
Tip No. # 2: Create a prospect describing your experience in real estate and / or other business ventures
Hard money lenders are more likely to approve a loan application from someone who has real experience in real estate investing, home repairs and changes, etc. However, if you don’t have any experience in this area, don’t worry. Take the time to explain your professional background and your experience with other companies and business projects.
Tip No. 3 – Be transparent and honest
Transparency is absolutely essential when applying for a private loan. Be sure to send all requested documentation to the lender and be honest about any potential problems with the property to be purchased with the loan proceeds. Transparency is vitally important because you will be working directly with the decision maker rather than an intermediary at your local bank. This is why building trust is so incredibly important in these types of transactions.
Tip No. # 4: Establish a Consistent Description of Why Your Loan Application Should Be Approved
Make sure your application is consistent and understandable. This is especially true for the part of the loan application where you ask for financial projections. If a hard money lender can’t understand your accounting logic and there doesn’t seem to be a realistic path to profitability, then your Los Angeles hard money loan could be denied.
If you’ve identified an investment property with tremendous potential for recovery, consider contacting your Los Angeles hard-money expert lender to help you turn your investment dreams into reality.