I work with a lot of real estate investors and other business people every day. These people are contacting me because they need access to capital. The use of that capital can vary, but that is why potential clients contact me. One source of capital that often goes overlooked in my niche is tapping into the equity of a primary residence. While we do not do consumer purpose loans, we are able to assist with owner occupied CA hard money seconds for business and investment purposes.
Many hard money lenders in California do not make loans on owner occupied properties. The reason is the potential for that loan to be a consumer purpose loan. While we do not help with consumer purpose loans, we are able to utilize the equity from an owner occupied property for true business purposes.
Many people do not consider this avenue when looking for financing. The real advantage, however, is in the way we can leverage this equity. By doing a hard money second, we are able to keep the existing financing in place. With interest rates on the rise, keeping an existing rate and term can be a big deal. In addition, by leveraging in a second position, we are able to finance only the amount of capital required. That capital can be repaid, the debt cleared and the existing first stays in place.
By financing only the amount of capital required, we can often times save clients money. While a private hard money second is not cheap, it is often times less expensive than refinancing the total debt on an investment property. A situation where this might be true would be an investment property in need of repairs prior to sale.
In a scenario such as this, refinancing the total debt on the investment property would require points and fees to be paid on the full capital stack. So if there is $500k worth of debt on the property, and our client needs $75k to improve the property and sell it for top dollar, we would be financing almost $600k. Even at a cost of 2 points, we are looking at over $12k in fees. On the other hand, if we do a smaller second to net only the $75k required, those fees may be cut in half.
While some investors prefer not to encumber their residence, the dollars and cents of exploring that option can make sense. This is especially true when there is a clear exit strategy in place - for example the sale of a property. With a clear exit strategy in place and a defined time-line to that exit, leveraging a residence with a hard money second can be a savvy business decision.
For more information about the creative loan options we can provide, give us a call today at 877 462 3422. You can also visit our website for more information about California hard money seconds, as well as other private hard money options we may be able to assist with. We specialize in alternative, non bankable financing options and are always happy to discuss your scenario.