Investing in real estate is one of the oldest and most proven methods of building wealth. Real estate investments boast an impressive resume of both passive income and strong returns.
Since real estate usually offers a favorable return on investment, especially San Diego real estate, purchasing properties can be quite expensive. If you don’t have the cash to field the costs up front, you may be looking for a good real estate loan.
Commercial real estate loans are an excellent way to finance real estate investments, but they’re not easy to get if you don’t have a strong credit score. What alternatives are available to you when traditional commercial real estate loans aren’t an option?
That’s where private money loans come in. Getting a private money loan in San Diego is a smart way to secure financing to help fund your investments.
What Is a Private Money Loan?
Private money loans are, in most cases, short-term loans used to acquire real estate. They aren’t usually issued by financing institutions like credit unions and banks; instead, they’re given by private money lenders.
The fact that private lenders are the ones giving out private money loans is what makes these loans easier to get than more traditional financing like small business loans. Private money lenders are able to bypass some of the traditional regulations and red tape banks have to abide by, making financing quicker and easier.
Private money loans usually have terms that last around 12 months, although in some cases, you can extend it anywhere from two to five years. The amount you can borrow is contingent on various factors, including the value of the real estate property you want to purchase.
Most private money loans have interest rates that range from 15-20%. These rates depend on the purpose of the loan, the length of the terms, and your relationship with the lender.
Private money loans are often confused with hard money loans, but these are two different types of loans with their own systems. A hard asset is the primary determining factor in a hard money loan; in other words, the value of the asset being purchased through the loan determines not only the loan amount but also the interest rate.
Private money lenders for real estate investing can use whatever criteria they choose to decide the terms of the loans they give to borrowers.
Why Work with a San Diego Private Money Lender?
Private money loans in San Diego can help you capitalize on California’s growing and profitable real estate market.
If you’re investing in San Diego real estate, it can be beneficial to work with a local lender, as they’ll already understand the value of the surrounding properties and their real estate potential.
What Are the Various Types of Private Lenders?
There are several types of private lenders. The five most common are:
- Hedge funds
- Family offices
- Self-funded finance companies
- Private individuals
- Private equity firms or funds
When selecting a private money lender in San Diego, you should work with a lender who offers an easy application, low interest rates, the right loan terms you need, and a quick closing time.
Advantages of a Private Money Loan
There are several advantages of private money loans. For one thing, they’re one of the best financing options for novice real estate investors who want to break into the real estate world.
Although private money lenders can set their own criteria for issuing loans, most private money loans are asset-based, meaning the property in question is what dictates how much money the borrower can receive.
This is particularly advantageous if you have a limited credit history or a bad credit score. Since the value of the property determines the size of the loan, there’s less direct emphasis on you, the borrower.
Private money loans are also easy to leverage. You can use the cash from the private money loan on more than one property rather than being restricted to just one property. More properties mean more sources of income.
Private money loans are also fast. This is crucial in the real estate industry, where you must pull the trigger quickly to start your fix-and-flip project.
How to Apply for Private Money Loans with Bad or Low Credit in San Diego
If bad or low credit is holding you back from getting a private money loan in San Diego, don’t lose hope. Even with less-than-stellar credit, you can still work with a private money lender in San Diego.
The first way to improve your odds of getting funding is to make sure you can repay the loan in the first place. Documenting and proving to the lender that you have a way to pay back the loan will make them more likely to finance your project.
Another way to get a private money loan in San Diego with bad credit is to get a cosigner.
Since California private money lenders usually base real estate private loans on the value of the property, there are many ways you can get around bad personal credit.
How to Refinance a Private Money Loan in San Diego
If you already have a private money loan, you may be interested in refinancing. This is a useful option if you’re looking for lower interest rates or want to extend your loan repayment terms.
To refinance your private money loan, you should start by determining the exact amount of money needed to pay off your current loan. Once you know how much you need, you can compare rates and lenders. Look for private lenders in California that offer good interest rates at loan terms that work for you.
Once you’ve settled on the private money lenders for real estate investing refinancing, it’s time to apply! The application process should be similar to the one you went through when you got your first private money loan.
How to Get Approved for a San Diego Private Money Loan from BEST Lending Co.
BEST Lending Co. is the premier private money lender in San Diego. We specialize in offering fix-and-flip loans at significantly lower interest rates than our competitors.
Our application process is quick and easy — and 100% online! We get preliminary quotes back to our clients within two hours and finance projects within five business days. Apply now to get started.
