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You have located an asset that is the proverbial “diamond in the rough.” The purchase price is incredibly reasonable and with the right updates and improvements, the property can be flipped for a substantial profit. It all sounds great, but you suddenly realize – how do I buy the property and fix it up?
Enter a hard money loan. This is a great option if you need to quickly secure funds to complete a major real estate purchase.
It is in your best interest to take some time and consider how you plan to present your project to a hard money lender in Los Angeles, as there are certain steps that must be taken when applying for a hard money loan. Required at the time of application.
Tip No. 1 – Submit a Detailed Personal Financial Statement
Private lenders in Los Angeles and elsewhere in California generally 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 repaying the borrowed funds. When creating your personal financial statement, be sure to check your credit score and credit report to note any issues or red flags to consider. For example, if you’ve had a bankruptcy, foreclosure, or other bad debt before, be sure to include a summary of what happened, lessons learned, etc.
Tip No. 2 – Create a Prospectus That Outlines Your Experience in Real Estate and/or Other Business Ventures
Hard Lenders are more than willing to approve a loan application from someone who has actual experience in real estate investing, fixing and flipping, etc. Nevertheless, if there is no experience in this area, do not worry. 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 while applying for a personal loan. Be sure to submit all requested documentation to the lender and be honest about any potential issues with the property being purchased with loan funds. Transparency is critically important because you’ll be dealing directly with a decision maker at your local bank rather than a middleman. This is why it is so incredibly important to develop trust in this type of transaction.
Tip No. 4 – Establish a coherent statement as to why your loan application should be approved
Make sure your application is coherent and understandable. This is especially true for the part of the loan application where it asks for financial projections. If a hard money lender cannot understand your accounting logic and does not appear to be a realistic path to profitability, your hard money loan in Los Angeles may be declined.
If you have identified an investment property with tremendous upside potential, consider reaching out to expert hard money lenders in Los Angeles to help you turn your investment dreams into reality.
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