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Top Reasons that Savvy Commercial Real Estate Investors Use Hard Money Loans


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Investing in commercial real estate can be a daunting process, especially if you have never done anything like it before. Even if you have previously dabbled in residential real estate investing, the commercial side of things can be quite different. One of the best ways to make sure you have the highest chance of a successful outcome with your endeavors is to work with experienced California hard money lenders to get the funding you need. While some investors swear by using traditional loans through banks, there are many good reasons savvy commercial real estate investors are turning to hard money lenders in California instead.

No Credit Checks

If you’ve ever tried to get any type of loan through a bank or other traditional lender, you know one of the most important elements that affects whether you get approved is your credit score. Even if you have a decent credit score, many traditional lenders won’t even consider giving you money unless you are above a number many individuals have difficulty achieving. Acquiring stellar credit isn’t easy for everyone, and just because someone doesn’t reach that mark doesn’t mean they are incapable of paying back a loan or even being financially responsible. This is why going with hard money lenders in California can often be your best choice. These individuals won’t look at credit score in order to determine an individual’s eligibility for a loan. Instead, they look at the potential return on the investment, focusing more on the value and potential of the property than the current financial standing of the individual looking for the loan.

Shorter Approval Times

Depending on the area in which the commercial real estate is located, properties may not stay on the market for long. This means you have a short time to get the approval you need so you can make an offer and successfully purchase that property. With a traditional lender, you’re likely looking at an approval period of at least weeks, if not months, because they will dive deeply into your financial history in order to determine if you are a safe investment for their funds. With California hard money lenders, on the other hand, you can be approved in just a few days, giving you the flexibility to purchase commercial real estate more quickly, so the best deals don’t pass you by as you wait for a lender to review your financial status and make a decision.

Guidance Along the Way

When you choose to work with hard money lenders in California, it’s more than just borrowing the capital you need for your real estate investments. Because of the way these loans operate, it’s more like entering a partnership with someone who is just as interested in the outcome and the return on investment as you are. After all, if you make more money on the dealings, they will too. You will also be more likely to use them for your future real estate investing needs, giving them a more stable investment as well. This means California hard money lenders are more likely to offer their guidance and expertise to help you make the most out of your investment.

Invest in More Properties

Working with a bank often limits you on the amount of money you can borrow at a given time. This means you may be limiting yourself to one project at a time. When it comes to flipping residential real estate, that’s probably wise, but when you’re looking at commercial real estate, you may wish to expand and take on multiple projects at the same time. Banks don’t typically allow this to happen. However, when you borrow your money from hard money lenders in California, as long as you can prove the various properties will be profitable, you’re far more likely to be able to invest in as many properties as you would like.

Enjoy Shorter Terms

Depending on the type of commercial real estate investing you wish to do, you may not want to be tied down by a lengthy mortgage or long repayment plan. Banks don’t typically offer options that are short, which can be a problem when you are looking to turn around your commercial real estate investments more quickly. Hard money lenders in California can give you the greater flexibility of shorter terms so you only have to pay interest based on the amount of time you have their money in your hands. This can be a valuable asset for those who wish to make commercial real estate investing a sustainable source of income and want to turn properties around quickly before moving on to the next project.

Use Equity Between Projects

When you are dealing with more than one project at a time, chances are you may wish to use the equity you have in one property for a project relating to another. If you are dealing with bank loans, they are far more likely to consider each of these properties separately and may not make it easy to use the funds from one to do work on another. Again, California hard money lenders can eliminate this problem. Because you’re likely working with same investor on all the projects, it won’t be a problem if one of your properties requires additional work and you wish to use the equity you have in another property to fund that project.

Make a Strong, Confident Offer

How many times have you heard of individuals who were preapproved for loan by a bank, only to find out the bank changes their minds when it comes time to make good on an offer placed on a property? While this may not be a common occurrence, it does happen and there’s not much you can do about it if it does. This is another advantage with hard money lending, especially if you work with a financing group. While there’s no guarantee it can’t happen, it is far less likely because hard money lenders in California typically don’t seek out commercial real estate investors to work with if they aren’t interested in making the deal. Therefore, you can go into the offer process much more confident you will end up with a successful outcome and be able to make this commercial real estate investment work for you.

A Higher Limit

Once a bank approves you for a loan, you can’t expect to receive anything additional from them. If you need more funds to complete repairs or make other changes to your commercial real estate, you either need to apply for another loan, which can be extremely difficult, or you need to use your personal funds and hope for the best. This isn’t the case when you work with California hard money lenders. In fact, if you realize something is going to cost more than you initially planned, if you can show your lender it is well worth the cost and will increase the return on investment appropriately, they are more likely to hand over the additional funds you need than a bank would be to approve you for an additional loan. This means you have greater flexibility in being able to make the necessary changes to truly achieve the return on investment you expect from your commercial real estate.

If you’re looking to invest in commercial real estate and provide a more solid financial future for you and your family, it’s important to work with the right California hard money lenders to give you the best chance at a successful outcome.

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