Thursday, January 27, 2011

Private Money Lending for Fix and Flip

It’s actually a pretty exciting time for San Jose real estate investors. If you are looking to buy and hold, rates are still very low, and there are some really good deals out there to be had. Distressed and undervalued properties can be found in many areas of San Jose (and surrounding cities) which can be
purchased for long-term investing, or for short-term fix and flip.

Successful short-term real estate investors depend on a quick turn-around of their fix and flip properties so they can get started on the next project. They want to get in and out in the least amount of time with the least amount of hassles. The faster they can fix and flip, the more profit they can turn in a unit of time.

Conventional long-term loans are mainly structured for the buyer who is going to own his home for several years. The bank wants the buyer to hold onto the property long term so that the bank can collect interest for many years. That is how the lender makes his money.

Conventional loans look cheaper, but they require excessive paperwork and take longer to close (in part due to new regulations) thus costing the investor time and money. And, not only does the borrower have to qualify for the loan, so does the property. If both don’t qualify, there goes the deal. Bottom line is that buying a distressed property, a foreclosed property or a short sale property using a conventional loan could take months, if the deal is approved at all. Conventional loans are just not “fix and flip friendly.”

However, private money loans are easier to qualify for, are much faster to close, and don’t usually come with a prepayment penalty. Additionally, private money investors can be more flexible when it comes to structuring the loan. Conventional lenders might not let you take out a loan against existing property you own to fund your new purchase, whereas this is done all day long by private money investors.

In the current San Jose real estate market where you find distressed homeowners who are in a hurry to sell, or you find undervalued property that could turn a nice profit easily and quickly, you DON’T want to be waiting for weeks for loan approval.

I have been obtaining conventional loans and private money loans for my clients for years, and I have built up a pool of private investors who have money to lend. We may be able to structure a private money loan that fits your financial needs.

Call me to discuss your project. I would like to help you with your purchase and your financing.

Geoffrey Gault 408-202-2089 direct
Investor Relations Manager
Automated Mortgage Investment 408-573-0711
San Jose, CA CA DRE # 01129916 NMLS# 346758

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