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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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...

19% Year-Over-Year Gain for Portland Real Estate

I read an article recently about the 19% YOY increase of inner city Portland home prices. Portland has become cool for the first time in its history and people are paying through the roof to live close-in the city.

Off the top of my head, here are some of the reasons behind today's run-up in home prices:

Can You Do an Owner Occupied Hard Money Second Mortgage?

The short answer is: "Yes."

Over the past year, we at First Capital Trust Deeds have been originating more and more owner occupied hard money second mortgages all throughout California (here, here, here, here).  Our borrower clients have been pretty strong with 650+ FICO scores and verifiable W-2 or self-employment income that shows their ability to repay the loans.  Borrowers must be able to clearly prove through financials statements (tax returns, pay stubs, bank statements, etc) that they can make the mortgage payments.

Another redeeming feature to...

Insights On Hard Money Cash-Out Refinancing

Back in 2006, I went to a weekend real estate investing seminar and listened to a real estate guru, who shared excellent information, tell myself and the other thirty people in attendance to "unlock the trapped equity in your homes" to use as capital for further real estate investments using 100% financing on as many properties as possible. In theory, this made complete sense to do bank or hard money cash-out refinancing at 8-13% in order to earn 30-40% cash-on-cash returns. But in practice, at the peak of the housing bubble in mid-2006, this was absolutely awful advice.

At that...

Private Money Mortgages For California Luxury Properties

First Capital Trust Deeds frequently works with California real estate investors who own high-end rental properties in the $1,000,000 to $10,000,000 range. For a variety of reasons, our clients cannot obtain jumbo bank financing on their rental property (or properties) and they turn to us for help finding the best private money financing for luxury rental properties that suits their situation.

Private money lending isn't a well-publicized part of the mortgage business so it's not always easy for a borrower to know if they have found the best terms available including points, fees, interest rate, duration, and prepayment penalty. And...

Zillow Survey Shows More Price Increases To Come

Zillow published the findings from its 2015 Q2 Zillow Home Price Expectations Survey two weeks ago and the results were not much of a surprise to those who have followed the housing market over the past decade or so. The experts in the Zillow Survey believed that home values will increase over the next year and will continue to increase through 2019.

Below are the general findings:

  • Experts predict home values will grow 19 percent cumulatively through 2019, with the median U.S. home value set to exceed $200,000 in April 2018.
  • U.S. median home values...

Will The HELOC Reset Wave Impact California Home Values?

The always excellent RealtyTrac produced a very informative "HELOC Resets Report" last month spelling out the coming HELOC reset wave of monthly payment resets on Home Equity Lines Of Credit taken out during the period from 2005-2008. California leads the nation with the most HELOCs resetting, which is not a surprise to most real estate watchers.

For those unfamiliar with HELOCs taken out during the 2005-2008 period, below is a little information about HELOCs and my experiences with the banks originating these loans during Housing Bubble 1.0.

HELOCs are typically bank portfolio loan products, meaning...

Do You Offer 90% LTV Owner Occupied Hard Money Financing?

Is it possible to obtain 90% owner occupied hard money financing for a primary residence in California?

Last week, a mortgage broker emailed us looking for 90% LTV owner-occupied hard money financing for his client in San Diego County plus two points commission for himself. This request isn't all that uncommon coming from a conventional mortgage broker. They sometimes send over a hard money loan request for one of their clients whose application was denied for FHA or conventional (Fannie Mae & Freddie Mac) financing. The reason for the denial is almost always due...

Is Owning Land Leading to Greater Income And Wealth Inequality?

Noah Smith is a brilliant and thoughtful writer that I've had the pleasure of reading over the years on his blog Noahpinion and his writing on Bloomberg. He recently wrote an interesting economic column in Bloomberg View about one of the criticisms of Thomas Piketty's work on the growing income and wealth inequality that has become ever more noticeable in society, using San Francisco as a primary example of one of the criticism's of Piketty's research and book.

As many people know, Piketty, a French economist, published a book last summer called "Capital in...

Foreclosure Auction Cash Recapture Hard Money Loan

One of the challenges for frequent foreclosure auction buyers who utilize hard money financing to leverage their return on investment (ROI) is the time that it takes from buying the property at auction to receiving cash-out funds on the refinance loan. Under most circumstances, this takes about 21-25 calendar days. However, First Capital Trust Deeds has a program that shortens the process from 25 days down to just 7 days.

What takes so long, you might ask?

Upon buying the property, a real estate investor will receive a Trustee's Sale Receipt on the day of the auction sale. After 15-18...

Extend and Pretend Loss Mitigation Strategies In Shadow Inventory

Lenders who chose "Extend and Pretend" loss mitigation strategies will eventually realize these massive losses when they finally account for homes stuck in the "shadow inventory" for seven years.

A friend of mine here in Portland showed me a copy of the judicial foreclosure paperwork on one of his expired listings, pointing out the massive "Escrow Advances" incurred by the lender ever since the borrowers defaulted on the loan back in the Spring of 2008.

"Are you kidding me?  $40,470.04!!!!!  Holy sh*t!!!!  Seriously?  That's horrible," was my response.

Then I added up the rest of the default fees. $47,343.97! Ugh!

"Some public...

These Hard Money Loan Scenarios Won’t Work

The great part about being in hard money lending is that we meet all kinds of highly talented people in the real estate and mortgage industry every single day. Many have carved out a specific niche market that they serve and they do it really well. It's safe to say, that every day we are learning something new from a Realtor, loan officer, private money lender, or a borrower.

One of the other great perks of doing private money lending is that real estate can often be a business for dreamers looking to get rich quick. Many people have fallen...

Alternative to California Owner Occupied Hard Money Second Mortgages

Something is in the air right now because I'm getting several calls each week for owner-occupied residential hard money second mortgages from homeowners all throughout California. I'd love to help the people out but owner occupied hard money second trust deeds are nearly extinct due to increased regulations and lack of trust deed investor appetite for making these loans.

Yesterday, I received a request from a homeowner in the Bay Area who needed $80,000 to pay off credit cards that financed their daughter's recent wedding. The credit card payments of $2400/mo had become a major burden on their finances and...

Question About Hard Money Fix and Flip Financing

A Northern California mortgage broker sent an email yesterday morning about hard money fix and flip financing:

Good morning Ted.  I need to know what kind of program you have for real estate acquisition and rehab finance?  Do you fund so-called "flippers"?

Yes, about 75% of our loans right now are for flippers or Owner Occupied 12-month bridge loans for buyers who were turned down for conventional and need financing within a week to close escrow. We typically go up to 80% LTV, but have done a few at 85% LTV when there is significant built-in equity at the time...

First-Time House Flipper Asks “Can I Get 100% Financing?”

First-time house flipper asks, "Can I get 100% financing?" Plus money for remodeling and carrying costs.  

A California Realtor with 15 years experience recently emailed First Capital Trust Deeds wanting to know "Can I get 100% financing?" hard money fix and flip financing to get into the house flipping game for the first time:

I am interested in short term loans, like for flips, for a while and then fix and flip, etc. I have a 15 year Real Estate license and I feel that I know what I am capable of doing, I just don't have the funds and I am...

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