Documents Required to Qualify for a Hard Money Loan

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You’re trying to invest in a new real estate project and you want a hard money loan. There’s good news and bad news. The good news? It’s usually easier to qualify for a hard money loan than a traditional mortgage. The bad news? “Easy” is relative. You need to meet fewer strict requirements, but you are going to have to put together quite a few documents.

Here’s what you need to get started.

Capital: What Are You Using for Your Down Payment?

Thoroughly document your capital. Unlike a traditional mortgage, they usually don’t care how you got your capital. But you should be able to show that you have the down payment liquid already. You can show this through your most recent bank statements.

Cash Flow: What Are Your Personal Income/Expense Statements Like?

In addition to your down payment, they also want to see your monthly cash flow. This usually comes in the form of bank statements. They should be able to see that you can easily pay for the loan payment, even if the project goes long. This is due diligence for your sake and for theirs.

Experience: What is Your Portfolio?

You’re basically starting a small, temporary business. So what have you done in the past that’s similar? You should show your portfolio of projects, as relates to home renovations, tenancy, property investments, and so forth. At minimum, you or your business partners should be well-versed in investing in real estate. Otherwise, how can they know that you’ll be able to pull off the project?

Housing Documents: What Are Your Projections for the Project?

This is probably the most extensive area, yet it’s the area that will most often differ. Different hard money lenders will have different requirements. In general, they will want to know:

  • How much the property is appraised for.
  • How much you intend to put into the property.
  • How much contractors have bid for the related jobs.
  • How much you stand to gain from the investment.

Some companies will want to see the basics; an appraisal and an inspection report, just like a mortgage company. But other companies will want a full business plan. Sometimes, it’ll depend on the amount of money they’re investing. And some lenders are just more conservative than others.

That’s a lot. But it’s less than it seems. Realistically, if you’re qualifying for a hard money loan, you need to get these documents in order anyway — these documents would be the foundation of your business plan.

Any questions? Reach out to IMCMoney today!

The Top 5 Fix & Flip Cities in California

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California is an attractive location because of its beaches, economic opportunities, and sunny weather, along with the diverse cultures and food options, natural landscapes, and tech and entertainment industry opportunities. However, it’s also an expensive place to live. The good news is, the expense hasn’t made the state any less attractive to real estate investors. In fact, the fix and flip market is incredibly active in California. Before you get started on this type of real estate investing, it’s essential to learn about the five top cities to consider when shopping for a fix and flip investment in California.

Modesto

If you’re looking for a smaller city with plenty of farmland and nature around, Modesto is the ideal location in Central California. The median home value in this city is just over $260,000, which is a nearly five percent increase over the last year. Many flippers love this area because the overall cost of buying a home is lower than many other areas of California, making it an ideal location to invest in a fix and flip project.

Rancho Cucamonga

Rancho Cucamonga is a more prominent city located in Southern California, surrounded by breathtaking mountain views. Although the area tends to be expensive with a median home value of nearly $470,000, the city offers a small-town, quiet feel, particularly when compared to the larger cities like Los Angeles. Home values are expected to continue to rise about 4.5 percent each year.

Sacramento

Sacramento is the state capital and is located in Northern California. It’s an excellent place to engage in fix and flip projects with an excellent return on your investment.The city offers a median home value of around $300,000 with many fix and flip investors generating an average profit of $90,000 for each home they buy and renovate. You won’t find a more affordable place to invest in real estate in the state without spending more money.

Ontario

Ontario isn’t just a city in Canada. It’s also the name of a city close to Los Angeles and San Bernardino. It’s the next door neighbor to Rancho Cucamonga with home values around $387,000. However, the rate of appreciation is higher in this city at 5.2 percent, making it an excellent alternative to more expensive areas of the state.

Irvine

Orange County in California is the central location for technology and education with higher incomes and a strong economy. If you have more money to invest in real estate, Irvine is the ideal location. The city boasts median home values of over $790,000, making it a much more expensive location than the other cities on our list. Fortunately, the profit potential is high because the area attracts a wealthy crowd.