You have located a site that is a “diamond in the rough”. The purchase price is incredibly reasonable and with the right updates and improvements the property could be turned around for a great profit. It all sounds great, but suddenly you realize – how can I afford to buy the property and fix it up?
Enter a hard cash loan. This is a great option if you need to quickly secure funds to close a major real estate purchase.
It is in your best interest to take a moment and consider how you plan to present your project to a hard money lender in Los Angeles, as there are some steps that need to be taken when applying for a hard cash loan.
Tip #1 – Submit a detailed personal financial statement
Private lenders in Los Angeles and elsewhere in California are usually not as concerned with the debt-to-income ratio as a traditional bank lender. However, it is still helpful to prove to the lender that you are fully capable of repaying the borrowed money. As you create your personal financial statement, be sure to review your credit score and credit report to note any problems or red flags to consider. For example, if you had a previous bankruptcy, foreclosure, or other bad debt, be sure to include a summary of what happened, lessons learned, etc.
Tip #2 – Create a prospectus outlining your experience in real estate and/or other business ventures
Hard money lenders are more inclined to approve a loan application from someone who has actual experience in real estate investing, home repairs and flipping, etc. However, if you don’t have any experience in this field, don’t worry. Take the time to explain your professional background and experience with other businesses and ventures.
Tip #3 – Be transparent and honest
Transparency is absolutely essential when applying for a private loan. Be sure to provide all required documentation to the lender and be honest about any potential issues with the property to be purchased with the loan money. Transparency is very important because you will be working directly with the decision maker rather than an intermediary in your local bank. This is why developing trust is so important in these types of transactions.
Tip #4 – Create a coherent narrative of why your loan application should be approved
Make sure your application is coherent and understandable. This is especially true of the part of the loan application where financial projections are requested. If a hard money lender cannot understand your accounting logic and there does not appear to be a realistic path to profitability, your Los Angeles hard money loan may be declined.
If you’ve identified an investment property with huge upside potential, consider reaching out to a Los Angeles-based hard money lender to help turn your investment dreams into a reality.