Blog

Read our most recent blog posts for information and updates on private money investing, hard money financing, the housing market and everything in between.

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Do You Offer Hard Money Second Mortgages in California?

The most popular question I've received over the past two weeks has been, "Do you offer hard money second mortgages?"

The short answer is "Yes, no, maybe, maybe not."

In other words - it really depends on the property, use, protective equity, and much, much more.

For those not familiar with the hard money second mortgage market in California, it dried up in 2008 with the bursting of the first housing bubble. Many of the trust deed investors making second mortgages up to 70% combined Loan-To-Value (CLTV) against the inflated home values of the bubble years lost their entire principal when...

Private Money 101: A Basic Guide to Understanding Hard Money Loans

Hard money loans are often misunderstood, in part because of shady lenders who tainted this type of loan's reputation by providing risky loans that left real estate investors dry with no property to show for it. Now it’s time to dispel the myths and talk about what hard money lending is really all about. This article will provide you with some basic information to get you started.

What Is a Hard Money Loan?

A hard money loan is a short-term loan secured by real estate and funded by private investors as opposed to conventional lenders such as credit unions or...

Get Started in Trust Deed Investing: Why Should I Use a Broker?

Trust Deed Investing Overview

Private money investing and hard money lending go hand-in-hand as inverse functions. Private money lending is different from a traditional bank loan. Borrowers receive funds from private individuals or groups who are looking to invest money on a relatively short-term basis.

The terms hard money lending and private money lending are often used interchangeably. Hard money loans are often used to finance real estate projects. Private investors often lend money based on the value of the property in question, which is called asset-based lending. Lenders can be individuals, small mortgage brokers familiar with real estate investments,...

Can You Trust Investing in Trust Deeds? The Pros and Cons

Investing can be tricky, no matter how financially savvy you are. With the current state of flux in the real estate market, it is no wonder people have questions about whether it's smart to invest in trust deeds. Here's the low down.

What Is Trust Deed Investing?

When someone loans money to someone else (generally called the "Borrower") and the Borrower puts up real estate as collateral, its a trust deed investment. The real estate could be practically any property the Borrower owns, whether it's vacant, residential, commercial, or has tenants. When you invest in a trust deed, you...

Hard Money & Private Money Hotel Financing

Over the past few years, we’ve received dozens of hard money and private money hotel financing requests from existing owners doing a major overhaul as well as buyers seeking acquisition funds to stabilize a property before taking out a long-term bank loan. This blog post outlines a recent competitively priced private money hotel acquisition loan for an experienced operator that we believe would benefit many other hotel owners.

As mentioned above, the buyer was an experienced hotel operator, owning several brands in Northern and Central California. Upon acquisition of the hotel, the new owner would convert the property...

5 to 7-Year Residential 1-4 Unit Rental Property Loan

We’ve started working with a new lender that has a niche 5 to 7-Year Residential 1-4 Unit Rental Property Loan program intended for the investor borrower who cannot quite qualify for a conventional loan but is stronger and warrants better loan pricing than traditional hard money offers.

There could be several reasons that a borrower wouldn’t qualify for conventional financing (Fannie Mae/Freddie Mac), including:

Office Building Private Money Loan Financing

Most every blog and portfolio post on this site have been written about loans that we successfully closed. Not this one. Today we talk about a nearly $11,000,000 office building private money loan financing scenario that we lost out on by 25 basis points.

The buyers were seeking 24- to 36-month private money financing to acquire an office building in Southern California that was being renovated from a unique configuration designed for the seller’s business into a standard office building. Construction was scheduled to take another 5-6 months, possibly longer, as new tenants would require specific arrangements for...

Financing Options for California Cannabis Landlords

Throughout the past year, I received dozens of calls from commercial property owners who rent a portion or all their building out to cannabis-related businesses. They are seeking information about what kind of loan they’ll be able to refinance into after their existing bank loan matures and comes due in the near future.

First, a little background on real estate lending to cannabis businesses:

At present, and probably for the foreseeable future thanks to United States Attorney General Jeff Sessions’ recent public statements, banks cannot lend directly to a cannabis-related business for real estate purposes. Banks also cannot accept...

Hard Money Business Purpose HELOC

Believe it or not, there is such a thing as a hard money business purpose home equity line of credit (HELOC) available in California for residential and commercial properties. At First Capital Trust Deeds, we have closed a few of these loans over the past couple of months and continue receiving inquiries from self-employed real estate investors every month for the program.

The hard money HELOC program works just like a bank HELOC in that borrowers are able to draw upon the line of credit and pay down the balance at any time during the duration of the...

The Downside of House Flipping

In our business of originating hard money fix and flip financing on renovation projects, we frequently see some ugly houses that are either outdated or have been neglected for many years. However, it’s not often that we see some really, really bad cases in house flipping where the former homeowner lived for many years in a house infested with black mold and rats living in plain sight.

Recently we had a loan scenario in Oregon come to us where the former homeowner had been incapable of maintaining the home for many years and the living situation got out of control....

8 Things to Know About Owner Occupied Private Money Loans

A portion of our business at First Capital Trust Deeds comes from home buyers who need to use owner occupied private money loans to close on the acquisition of a new property. Most of the time, since we provide private money loans and hard money loans, we are the loan option of last resort since most home buyers prefer the ultra-low interest rates and favorable terms of conventional financing.

If you cannot qualify for a conventional loan but have 30-40% down payment, FCTD may be able to provide an owner occupied private money loan as a short-term solution to...

Portland Home Prices Going Nuts – But for How Long?

Portland home prices rose 11.80% over the past Year-Over-Year (YOY) period from January 2015 to January 2016, which is starting to put a lot of pressure on buyers who are seeing the bidding wars escalate on starter homes all the way up into the higher-end market.  Below is a chart of the top twenty metropolitan markets and the home price appreciation figures with Portland leading the way nationally:

Why is Portland leading the United States in home price appreciation over the past year?

There are several reasons which aren't especially unique to Portland, but...

Know Your Exit Strategy Before Taking Out a Hard Money Loan

Having a definitive exit strategy is one of the most important things to determine for a borrower who utilizes private money or hard money financing to acquire real estate. Hard money loans are usually short-term in duration and more expensive in comparison to traditional bank financing, with terms ranging anywhere from nine months to three years and interest rates starting around 7.99% to 12.00%. Therefore, it's best that potential hard money borrowers know what they are getting into and how they will get out of the loan before...

What Are the Costs of a Hard Money Loan?

We receive several dozen hard money loan inquiries each week and nearly 100% of the time the first question we're asked is, "What are the costs of a hard money loan?" And then it goes to, "How many points?  Are there any other fees?  What's the interest rate of the hard money loan?  Is there a prepayment penalty?"

If someone isn't asking about price/costs/points/fees/rates/prepayment penalties on a hard money loan, or doesn't have a slight degree of sticker shock, then it leads us to believe that something's up.

For...

Lack of Affordable Housing Supply Keeps Driving Home Prices Up

Business Insider had an excellent article posted on Yahoo Finance about the current housing crisis that many local markets are facing - limited affordable housing supply.

The next housing crisis is here.

And this time the crisis is all about one thing: supply.

Following the mid-aughts housing bubble that saw homeowners across the country get themselves upside down in homes and mortgages they couldn't ever afford to repay—a crisis that was as much about too much supply as it was about too much bad financing—the market has gone...

Do 3.0-4.0% Hard Money Loan Actually Exist?

Sorry to ruin the suspense but 3.00% to 4.00% rates on hard money loans don’t exist. Yet, that doesn’t keep prospective borrowers and other mortgage brokers from requesting hard money loans priced at these interest rates every month.

I completely understand the “If you don’t ask for it, you won’t get it” concept. As a customer of any product or service, you should ask for the best pricing or a discount or even an added bonus offer like infomercials give us in the, “Oh but wait, there’s more!” offer.

But asking for 3.00% to 4.00% financing at 75% LTV on...

Lenders Becoming More Cautious on Cash-Out Refinances

Over the past two weeks, we’ve had three different lenders (one investment fund, one family office, and one individual), tell us that they’re limiting the Loan-To-Value (LTV) they’re giving on hard money cash-out refinances.

The primary reason each cited for cutting back was that the majority of the defaults in their loan portfolio are from cash-out refinances on loans originated 3-12 months ago. Another reason is that they believe that the market, namely the current 12-month fix and flip private money lending cycle, may be reaching its final phase and they’d like to limit their exposure to potential problematic cash-out...

How Business Purpose Loans Become Consumer Purpose

Every month or so, we’ll receive an application for a 12-month business purpose hard money loan on an investment property with plenty of equity to come in below the 65% LTV threshold.  Yet during the process of underwriting the loan, we realize that what looked like a straight forward business purpose bridge loan on an investment property has now become a consumer purpose hard money loan.

This may not seem like a big deal to most people but in the hard money and private money lending world, where many of the investment funds and family offices lend for business purpose...

The Hard Part About Obtaining a Hard Money Construction Loan

A hard money construction completion loan seems pretty easy and straightforward at 65-75% of as-is value of a partially finished home. And typically they are easy to get approved when it comes to the lender's underwriting. Builders and house flippers, along with hard money lenders, often run into challenges from the title company’s issuance of a 2006 Alta Extended Lender’s Policy with 125% coverage.

In our experience with cash-out construction completion loans and originating purchase + rehab reimbursement loans, securing title insurance coverage can be the final hurdle that the borrower needs to overcome in order...

When Hard Money Borrowers Are Stuck On After Repaired Value

Every week or so, we receive a phone call or email inquiry from a prospective house flipper inquiring about our After Repaired Value (ARV) hard money fix and flip financing programs. And I have to admit that as soon as I hear someone talking about an ARV loan, my ears perk up because I know that it’s going to be hard to get the person off their insistence on an ARV-based loan.

Why are they so insistent on obtaining a 75% or 80% ARV loan in the first place?

Nine times out of ten the prospective borrower found a...

What First-Time House Flippers Need to Know About Hard Money

Each week it seems that I talk to an aspiring first-time house flipper who is interested in taking out a hard money loan to finance their very first acquisition. Most of the time, I’m the first or second mortgage lender they’ve spoken to about hard money fix and flip financing. Prior to our conversation, their only exposure to hard money financing was through the real estate coaching program that they’ve been enrolled in over the past few months, online forums, or a conventional mortgage broker. And judging by the questions I’ve been asked, it seems that the coaching programs aren’t...

1 & 2 Point Origination Fees On Private Money Fix & Flip Loans

As acquisition prices for fixer upper properties continue to rise due to increased competition in local markets, First Capital Trust Deeds has lowered the upfront costs on private money fix and flip loans by offering experienced house flippers two pricing options at 1 or 2 points.

Below is an example of the pricing breakdown at 1 Point and 2 Point Origination Fee on a $400,000 Purchase Price with a $435,000 AS-IS Value and a $550,000 After Repair Value (ARV):

1 Point + $1,300 @ 12.00% (14.081% APR)

  • $340,000 Loan Amount (85% of Purchase Price)
  • 12.000% Interest-Only  (14.081% APR)
  • $3,400/mo Payment
  • 12 Month...

Can You Do Construction Completion Hard Money Loans?

Will lenders provide construction completion hard money loans to a homeowner building a new house who runs out of money?

I received a call last week from a Realtor in the Antelope Valley (Los Angeles County) who is building a custom home and so far has paid for the entire project with cash. Like many people experience when building a home, cost overruns and unforeseen obstacles have a way of appearing at the worst time, which makes people worry that they'll run out of money to pay for the project.

The big question she had was, "Would a hard money...

Have We Reached the Peak in the House Flipping Cycle?

This morning my Google Alerts sent me a story from Zillow about supermodel Cindy Crawford and her husband who successfully flipped a home in Malibu, recording a $7,000,000+ gain on sale. Pretty impressive, eh?  Which got me thinking: "Are we approaching the end of this house flipping cycle now that one of the world's most famous fashion models just made a killing flipping a house in Malibu?" Could this be one of those symbolic moments where people will look back and say, "Oh yeah, Housing Bubble 2.0 was toast the moment Cindy Crawford flipped that house? We...

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