Finding hard money lenders in California intimidated me as a young real estate investor, even after I’d successfully used hard money loans a few times. I knew that getting one would let me complete my first fix-and-flip, but I always worried I’d be on the hook for interest payments that I couldn’t pay off in time. There’s nothing quite like desperately hoping your contractor crew can finish a set of renovations before the first interest payments come due.
A lot of my problems with hard money loans stemmed from working with lenders that I didn’t really understand or trust. If I had taken the time to consider every available option instead of jumping at the first lender who was willing to talk to me, I probably would have been able to secure more favorable financing terms and grow my business faster. But there’s also the possibility that I could have gotten scammed or trapped in a loan I couldn’t repay.
That’s why I’m here today to walk you through a handful of hard money lenders in California. With this knowledge, you’ll know how to align your lender with your business needs. And by the time you’re done reading, you’ll have a few solid leads for hard money financing in California. Let’s dive in.
Why Working With The Right Lender Matters
Financing is key to operating a good house-flipping business, and most of your financing is going to come from hard money loans. Hard money loans are issued by private lenders rather than banks or financial institutions, and they’re subject to fewer regulations as a result. Typically, when you take out a hard money loan, it’ll have a higher interest rate and a shorter repayment period than you’d get with an equivalent mortgage. And if you can’t pay up, the lender will be entitled to seize your property’s equity.
Because hard money loans are riskier for both borrowers and lenders than other types of financing, it’s important to trust your lender and to know that they’re reliable. Unsavory lenders can include troublesome covenants which obligate you to pay them a share of your profit from deals, even if you’re current on your interest payments. If you work with someone subpar, you might get exploited, so it pays to know which lenders are vetted and which ones aren’t.
Popular Hard Money Lenders In California
Now that you’re familiar with the whys of hard money lenders, let’s take a look at a trio of the well-known lenders in California.
Residential Capital Partners
Residential Capital Partners is quite popular among real estate investors thanks to its all-around combination of good features. With RCP, you’ll be able to borrow up to $1.25 million and get financing for up to 70% of the after-repair resale value of a home. Furthermore, you won’t face any prepayment penalties if your projects are ahead of schedule, and you can flip for a profit faster than anticipated. As a result, Residential Capital Partners is a great option for investors who are skilled at planning ahead.
For the ability to repay your loans early, however, you’ll need to account for this lender’s higher-than-average interest rates, as well as its relatively inflexible 9-month loan term. Given that if everything goes right, you should be able to buy, repair, and sell most average-size single-family homes within the 9-month period, it’s one more incentive for investors to have their act together when they borrow. If you can point to 10 successful flips, RCP will give you better terms, which is a nice bonus.
- No prepayment penalties
- No down payment required
- Potential for more attractive terms for experienced investors
- Interest rates start at 10%
- 9-month loan term
Finance of America
Finance of America is another company that many consider a real estate investor’s best friend. Its loans are available for amounts ranging from $50,000 to $3 million, and they’re willing to cover up to 100% of renovation expenses as well as 75% of the after-resale value of a property. They’re also accustomed to working with newer investors, so they don’t require any prior experience in their underwriting process, which is a huge boon when you’re just starting out.
To top it off, your interest rates can be as low as 6.75%, and you’ll be on the hook for the full repayment in either 12 or 18 months (depending on your preference). The only real catch is that if you aren’t a U.S. citizen, there are a few nationalities which Finance of America won’t lend to, which can be a dealbreaker.
- Maximum loan size of up to $3 million
- Great for getting your business off the ground with minimal experience
- Optional interest reserves
- Unfavorable interest rates for 18-month loan terms
- You might not be from an eligible country
Capital Funding Corporation
Capital Funding Corporation is a national hard money lender which also operates in California, and it’s the go-to lender for a large number of investors who target upmarket homes for fix and flips. With this lender, you’ll be able to take out loans for upwards of $5 million, and often with a loan-to-value (LTV) ratio of 90%. That means it’s among the very best hard money lenders out there for taking on the biggest deals. Plus, Capital Funding Corporation can get money into your account in a few days if needed—making it quite fast.
The main downside is that you’ll need to be an experienced investor with a large opportunity before they’ll even talk to you. While their interest rates can go as low as 7%, the unfortunate fact of the matter is that your business needs to be mature and able to access funding elsewhere before the rates will be that favorable.
- Maximum loan size of $300 million
- Rapid underwriting process
- High LTV
- Minimum loan size of $5 million
- Interest rates tend to be high
Crescent Lenders is a great lender that caters to the needs of the median real estate investor. Crescent’s interest rates start at 7.99%, and they’re willing to extend you financing for as much as 75% of a home’s value. Furthermore, you can borrow as little as $200,000 or as much as $5 million, and all while closing in under a week’s time. Its loans typically have a term of between 6 and 60 months, which is flexible based on your needs and ability to pay.
All of the above make Crescent one of the best hard money lenders in California, but it isn’t perfect. One problem area is its underwriting process, which is more opaque than it is with other lenders. On the whole, its underwriters are willing to give the go-ahead to investors that other lenders might not, but seemingly creditworthy and aspiring borrowers may find that their interest rates are higher than expected. The secret seems to be how experienced the underwriters perceive the borrower to be, which means that new investors are likely to pay higher rates. Still, it’s a relatively favorable lender for new investors to work with overall.
- Can get loans with poor credit
- Potential for extended repayment period
- Minimum loan of $200,000
- Experience is a decisive factor when it comes to interest rates
- LTV is only 75% at best
Last but not least, there’s Allied Equity—a lender that serves both commercial customers as well as members of the public who want to take out a mortgage to buy a home. Though their split attention between commercial and consumer lending means they don’t focus solely on house-flipping businesses or hard money loans, the experience they have in the market makes them uniquely knowledgeable compared to other hard money lenders in California. And they offer unique bonuses to people who are first responders or veterans, which makes them especially attractive for investors in those demographics.
To be clear, this isn’t the right lender for you if you’re looking for the lowest possible rates or the fastest turnarounds. Though most of its loans will clear within two weeks, the interest rates for people without the special privileged rates won’t be much better than anywhere else. But if you qualify, you can secure a loan with an LTV of 100%, which is very good for cash-strapped investors.
- Perks for vets and first responders
- Unique expertise and perspective on the market
- Can get an LTV as high as 100%
- It doesn’t cater to real estate investors specifically
- Relatively slow approval time
It’s Smoother To Get Financing When You Have A Network
If the three lenders I’ve discussed above don’t look like they’re a good fit for your business, don’t worry. There are quite a few options for hard money lenders in California, and there’s bound to be one out there that’s appropriate for your needs. But did you know that teaming up with an organization that can help you find the right lender is a great way to speed up the process?
When you become a HomeVestors® franchise owner, you’ll join a nationwide group of investors who have direct access to some of California’s leading hard money lenders. Aside from introducing you to lenders that your business needs to grow, HomeVestors® franchises also receive house flipping training, property valuation software, and a steady supply of leads for flippable properties. Furthermore, you can get the mentorship you need from senior investors who are ready to share their knowledge and expertise with you.
In summary, owning an independently owned and operated HomeVestors® franchise helped me supercharge my company’s expansion, and it could do the same for you.
Want to quickly secure a loan from the top hard money lenders in California? Request information about becoming a HomeVestors® franchise owner today.
Each franchise office is independently owned and operated.