Ten steps that will help you choose an honest lender in Los Angeles
Real estate experts note that the hard money market in Los Angeles is becoming increasingly crowded, which may cause these private money lending companies to relax their standards. There are at least eight large companies in the Los Angeles area that will lend against residential and commercial real estate, but many other small businesses and individual investors have joined the team. The smell of big money – a glorious real estate market, rising interest rates, banks cutting back on loans – has prompted many money lenders to enter the private money lending industry in Los Angeles. .
And they are fine. The latest edition of LA Weekly reports that the high-end housing market in Los Angeles is booming, with the average price dropping from 5 million to 3 million. In Malibu Coast, prices hover near $10 million while Beverley Hills is $9.2 million and Pacific Palisades dips the lowest for $5 million. For local Angelenos who want a slice of this “hot” market, want more than a cardboard box, but are rejected by their bank – there is only one way out. The private money lender. But the market for hard money loans in Los Angeles has swelled and with it comes the difficulty of knowing where to turn.
If you are in this position, these ten factors will help you.
1. Experience – Experts advise choosing a company that has been around for a long time and has a reputation for reliability and trust. Hard money lending typically comes with increasingly complex origination, servicing, and investor relations regulations that must be met to be compliant. The seasoned investor is more likely to be able to skillfully negotiate a win/win scenario for all parties involved in the loan. His experience gave him that confidence and that training.
2. Specialize – Lenders who specialize in one or two types of loans are likely to be better for you than generalists who claim to handle all loans for everyone. Specialists are more likely to have the in-depth and specific knowledge needed to help you choose the best loan for your situation.
3. Licence – Hard money lenders must be duly licensed with the Department of Corporations or the Department of Real Estate. Also look for mentions of the National Mortgage Licensing System on their websites.
4. Transparent – Lenders should be upfront with you about all details of the transaction. You should be able to have web access to relevant loan data during the origination process and you should be able to see the lender’s guidelines. If a hard money lender (also known as a bridge loan or private money lender) has “indicative” rates, ask how to get those rates. There should be no bait and switch tactics.
5. Wallet – You will need guidance in loan-selection. Choose a company that has a rich portfolio of private and corporate investors. The more options you have, the better. This not only gives you alternatives for loans, but also indicates that the company can afford your capital.
6. Capital – Choose a company that shows it has more than enough capital. Private lenders will not only lend to others, but may also give you long-term loans – up to seven years or more. You will need a company that can cover these loans. Ask around until you find one you trust.
7. Professional – The lender should tell you immediately if they think they cannot serve you. Look for loan programs on the website and beware of misleading advertisements. The lender, too, should not change the terms at the last minute. Each of these factors indicates a lack of professionalism.
I also suggest you check out other resources such as the lender’s website, LinkedIn or similar social media platforms, or articles the lender may have written, etc. Check reviews. See if the public image of the lender is professional and consistent.
8. Speed - One of the main reasons borrowers turn to hard money loans is for speed – the opportunity to grab and flip a “hot” project. Or the ability to complete construction before the deal dries up. Or the ability to get to the front of the line and grab that one-in-a-billion opportunity. This is especially important in today’s economic market in Los Angeles when housing inventory is tight and prices are high. You will want to get there first. So you need a quick and fast loan.
The general private lender will accept you for a loan within 1-2 days. Some can even process your request the same day if they trust you. Shop carefully.
9. Hire a lawyer – There are all kinds of money lenders, some of which are more honest than others. Some give you loans legitimately, then increase the interest when you need to extend your terms or your time. But others set onerous terms that force you to keep borrowing and paying ever-increasing interest. The best way to avoid this situation is to hire a lawyer to review all documents before signing them. If you can’t afford a lawyer, most law societies have pro bono arrangements. And depending on your age, the American Association of Retired Persons may be able to help you through its Legal Services Network program.
ten. Competitive rates and fees – The cheap does not always demonstrate professionalism. Nor the reverse. Sometimes an expensive lender can be a hack. But cheap fees are always attractive, and in a crowded market like Los Angeles, you’re more likely to find private lenders who offer competitive pricing. Look for a reasonable rate – but also review the other qualities so you end up choosing someone whose company makes you look like a hero
How do you choose?
There are several ways to find a pawnbroker you trust. You can use a broker. The broker knows the market and can use his connections.
You can also Google “hard money lenders” in your area or filter your network for resources. Other reliable options are to speak to a mortgage company, title company or real estate agency and ask for references.
In short, private lenders are growing rapidly in today’s Los Angeles market, making it all the more difficult to know who to choose. There are too many who would like to help you.
Hope this article helps you dig your choice!