Residential lending in California is a unique offering. California is one the most liquid real estate markets in the United States, which means that lenders are competing for your business. BiggerPockets shows 149 active hard money lenders in California.
The reason is that California has long been home to some of the most fruitful real estate investments, thanks to mass migrations of people looking to take advantage of a strong job market, liberal policies and nice weather. The California market has faired quite well since 1970. The average price per square foot in California is $275 according to Zillow.
California has been popular amongst real estate crowdfunders as well.
Source: California Legislative Analyst's Office
What cost of capital can I expect on a California hard money loan?
California hard money certainly differs from county to county and even city-to-city. San Francisco hard money is extremely competitive. Rates can be as low as 6% for near-prime borrowers. A good rule of thumb is that California hard money should cost between 7% and 11%, depending on credit, experience and the market. Hard money loan rates are very asset and geo-dependent, so expect to find a wide variety of offerings.
In California, hard money lenders frequently lend you an amount of money equal to or less than 80% of loan-to-value ratio. This effectively means, if you are buying a property for $100k, you may borrow up to $80k from a lender.
One thing to keep in mind is that most lenders take points (a percentage of the loan) as payment on top of the interest on the loan. So while you can expect 7-11% interest, you should be ready to pay 1 or 2 additional percentage points to the lender. The good news is that this is significantly lower than much of the rest of the country, where 2 to 5 points is more standard. Again, you have some amount of power as a borrower in California.
California Hard Money: An Overview
Who are California Hard Money Lenders?
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There are many hard money lenders in California. They are private funds of individuals or groups of individuals that act as local lenders. Hard money lenders tend to know their local markets quite well and thereby, uniquely situated to make fast loan decisions.
There are some large national players that include Lima One Capital, Loan Oak and RealtyShares.
Other California considerations
It is important to note that California has very strict zoning and tenant laws. See the California Bureau of Real Estate website for more information. The residential tenant in California is protected by very liberal policies that guard against predatory landlords, flippers or lazy developers. If you are borrowing for a property in California that has existing tenants or has significant structural damage, make sure to do your homework.
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California Hard Money Loans Funded Through RealtyShares
California Hard Money Information and Lender Directory
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