You have located a property that is the proverbial “diamond in the rough.” The purchase price is incredibly reasonable and with the right updates and improvements, the property could be flipped for a substantial profit. This all sounds great, but you suddenly realize – how can I afford to buy the property and fix it up?
Enter a hard money loan. This is a fantastic option if you need to secure funds quickly to close on 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 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 typically aren’t as concerned about your debt-to-income ratio as a traditional bank lender. Nevertheless, it is still worthwhile to demonstrate to the lender that you are fully capable of paying back the borrowed funds. While creating your personal financial statement, make sure to check your credit score and credit report to note any considering issues or red flags. For example, if you have a prior bankruptcy, foreclosure, or other bad debt, make sure to include a summary of what occurred, lessons learned, etc.
Tip No. 2 – Create a Prospectus that Outlines Your Experience in Real Estate and/or Other Business Ventures
Hard money lenders are more inclined to approve a loan application from someone who possesses actual experience in real estate investing, fixing and flipping homes, etc. Nevertheless, if do not have any experience in this area, do not fret. Take the time to explain your professional background and experience with other business ventures and projects.
Tip No. 3 – Be Transparent and Honest
Transparency is absolutely essential when applying for a private loan. Make sure to submit all of the requested documentation to the lender and be honest about any potential issues with the property that is going to be purchased with the loan funds. Transparency is critically important because you will work directly with the decision-maker rather a middleman at your local bank. This is why developing trust is so incredibly important in these types of transactions.
Tip No. 4 – Establish a Coherent Narrative as to Why Your Loan Application Should Be Approved
Make sure your application is coherent and comprehensible. This is especially true for the portion of the loan application where it asks for financial projections. If a hard money lender cannot understand your accounting logic and there does not appear to be a realistic path to profitability, then your hard money loan in Los Angeles could be denied.
If you have identified an investment property with tremendous upside potential, consider reaching out to the expert hard money lender in Los Angeles to help turn your investing dreams into a reality.