Hard money is the most reliable resource for successful developers and flippers seeking their fortune in the lucrative California real estate market.
In the fast-paced world of property development, timing is of the essence.
When a desirable property becomes available, no-one can afford the laborious and time-consuming processes of traditional lenders with their rigid requirements.
You need fast money and you need it now!
You need hard money.
Hard money gives you access to quick capital, allowing property entrepreneurs the flexibility they need to seize the day – and the property they want.
Here are just some of the ways successful developers and flippers in California are using hard money including some real-world examples from Equidy’s very own clients.
Financing renovation costs
Sometimes, a traditional loan only covers the purchase price of a property but not its redevelopment.
An experienced flipper bought a quaint old duplex in the very desirable Potrero district of San Francisco.
It was one of many renovations taking place in the area and the opportunity was too good to overlook.
But their initial loan of $1,195,000 only allowed them to purchase the property.
They required a second hard money loan to undertake the renovations.
Equidy provided them with a second deed of trust amounting to a $600,000 loan, based on the client’s protective equity in the property of $900,000 and its After Repair Value (ARV) of $2,695,000.
The property was totally refitted down to the studs.
It completed a stunning transformation of two self-contained units as well as an extra 780 square feet of living space.
It delivered an outstanding result with a resale price of $3,300,000.
Funding time-sensitive deals
Successful developers pounce when vendors sell their properties because they need cash in a hurry.
Consider a flipper in Los Angeles who identifies a distressed single-family home in a desirable neighborhood.
The seller is desperate to close within 10 days due to financial difficulties so there is no time to waste.
A hard money loan can be approved in as little as 48 hours and so it is not just the best but often the only solution, allowing investors to secure a property ahead of competitors.
After completing renovations, the investor sells the home within three months for a significant profit, easily covering the higher interest rate on the hard money loan.
The seller was paid in cash for their property and the investor flipped it for a tidy dividend.
It’s a win-win!
Overcoming credit challenges
An Equidy client identified an ideal fix and flip property in Emeryville, California.
But she didn’t tick all the boxes desired by the big banks.
Equidy stepped in to provide a hard money solution where the banks would not.
That’s because hard money lenders are more concerned about a property’s ARV (After Repair Value) than the borrower’s capacity to repay the loan.
The primary focus is on the profitability of a project rather than a borrower’s credit history.
Hard money loans may also be granted with as little as 10 per cent downpayment.
And that is exactly what happened at Emeryville with a $1,000,000 loan granted with just 10 per cent cash up front.
There was $200,000 set aside for construction with the rest going towards purchase of the property.
The project ultimately produced two refurbished properties and a handsome profit of $300,000.
It is precisely what successful developers hope and plan to achieve.
Capitalizing on auction opportunities
Most auctions demand instant payment making traditional financing prohibitive.
Imagine a developer in Sacramento comes across a foreclosure auction for a multi-unit property.
Without a hard money loan, this looms as another golden opportunity set to line someone else’s pockets.
But with the benefit of hard money, this intrepid investor grabs their bargain.
They redevelop the property, renting it out to generate a steady income stream while refinancing toward a conventional loan with better terms for the long haul.
Scaling quickly
Sometimes, all of your capital is tied up in one project.
It means you have no scope to upscale your investments, should an opportunity arise.
Unless you turn to hard money!
That’s how an Equidy client harnessed the power of hard money in Gilroy, California.
She had already purchased a $1,650,000 property but required additional funds to secure a second property nearby.
Equidy stepped up to provide a hard money bridge loan to the tune of $477,500 allowing her to secure both properties.
It amounted to a first deed of trust on the new property and a second deed on her original property.
The bridge loan was granted on the basis of her protective equity in the original property and the expected combined value of both properties.
Without hard money, her ability to scale quickly would have been lost.
Bridging the gap between financing options
Red tape abounds in the world of finance.
It strangles opportunity and development.
Hard money can be used to start projects that otherwise just wouldn’t get off the ground.
Let’s say a developer in San Francisco purchases a commercial property with plans to convert it into a mixed-use residential and retail space.
They’ve secured long-term financing but the funds won’t be made available until after construction milestones are met.
It’s a classic catch 22.
A hard money bridge loan covers the upfront costs of acquiring and beginning construction on the property until long term financing is made available.
It means the developer avoids costly delays and completes the project on schedule, maximising profits.
Partnering for high-risk projects
Hard money is often the only rein to pull when traditional lenders consider projects too risky.
An existing Equidy client with an excellent payment history bought a traditional 1950-built home in Carmichael, California for $405,000.
The enormous 14,640 square foot lot offered the opportunity for redevelopment and our client launched an ambitious project to remodel the existing home while building a brand new home adjacent.
Equidy provided him with a first deed of trust amounting to a $490,000 loan, based on his protective equity in the property of $260,000 and its ARV of $750,000.
The development was an outstanding success with the property sold for $847,000 which was well above its listing price of $799,000 and $97,000 beyond ARV.
Explore your hard money options
Hard money is safe, reliable, highly accessible and often the first port of call when successful developers need money fast.
That’s what makes it so powerful.
Property developers not using hard money are missing a trick and quite often missing out on their next pay cheque.
In California, Equidy has an intimate and personal history with property, and has covered all aspects of real estate and property development in California for more than 40 years.
Equidy is a hard money lender with one of the most respected and enviable reputations on the west coast.
They stand by their core belief that anything is possible and they are determined to prove it every single day.
Even in challenging economic times, they strive to reward entrepreneurship and always help their clients crystallize their wealth creation dreams.
But best of all, Equidy is not just a financier.
They have an intimate knowledge of the business to provide hard money solutions for every circumstance.
Equidy also work creatively with their clients every step of the way, providing their wealth of knowledge and support network as their clients’ projects take shape.
They enjoy long and established relationships with serious investors, sellers and real estate professionals while leveraging their reputation and trust, using clear communication to minimise the risk to all parties.
Contact Equidy today to book your free strategy call.
