What is San Diego Hard Money?

You may have heard the term San Diego Private Money or San Diego Hard Money used when talking about real estate loans. So what is it? Hard Money, or Private money, is a term used to describe loans that are made by private individuals or entities. They are used frequently in California real estate transactions.

The primary difference between private money ;loans and conventional loans, the kind you get from the bank, is that private money loans are mostly based on the property’s collateral. This is why you typically find these loans written far under the property’s value. The thought process of the investor is that the equity available should be sufficient in case there is a loss or default by the borrower.

Often times hard money loans are from private investors. However, they can also be from private institutions and entities.

You may have wondered if private money is the right solution for you. There are many variables that make up this answer. First, you should always try conventional sources of money first. These would include national banks, regional banks and credit unions. These channels will offer the most competitive pricing and terms to your average borrower.

If a normal bank will not finance your transaction then you may be eligible for private money options. In order to take advantage of these loans there must be equity in the transaction considered, an ability to repay and the willingness to pay 2 to 3 times the amount in interest rate and fees.

At this point you may be wondering why anyone would want utilize hard money. The reality is that there is a time and place where this type of loan makes sense. Some of these reasons could include:

• You need a Bridge Loan
• You’re an investor who needs cash to buy property
• You need to rehab a property to sell
• You are in a short escrow and need to purchase quickly
• You need to access the equity in your property for financial purposes
• You need to extend a bridge loan
• You have many properties and a bank will not finance any more
• You have a unique property and a bank will not lend on it
• You have troubled credit but a strong equity position and the ability to repay
• You need temporary cash flow for a business

Like most things in life, there are advantages and disadvantages of private money. San Diego hard money is typically expensive and has shorter terms than most bank loans. However, the speed and flexibility in which these loans can be done is extremely valuable. It can be a useful tool for some borrowers’ California real estate loan needs.

Really, hard money is really not that hard. In fact the time in which it takes to complete a private money transaction is typically much faster than a traditional bank loan. The difficult part about hard money loans is the fee and terms associated. It definitely is not the best solution for everyone, but it can be a perfect solution for some.