An experienced Southern California real estate investor used a Westminster California private money bridge loan to cash-out equity on a free and clear rental property.
At First Capital Trust Deeds we see a few loan situations, especially towards the end of the calendar year, where our self-employed clients need a 12-month private money bridge loan to stabilize a new acquisition or an existing rental property.
Why does this happen toward the end of the year?
Because self-employed borrowers have a really hard time getting conventional bank financing and often draw from their business account to pay expenses rather than taking a steady paycheck. Especially self-employed real estate investors who have money moving across multiple accounts who are also buying and selling (flipping) real estate all the time.
What happens is they’ll buy an investment property at a foreclosure auction in cash, hoping to refinance into a 4.00%-ish 30 year fixed conventional loan. But, often times, that cannot happen because they don’t have themselves set up on a monthly paycheck from their business. And they don’t want to go through the process of enlisting their CPA to do their books in September (and again in January) and issue a year-to-date (YTD) earnings statement, which may or may not work for the conventional loan underwriters.
Therefore the need for a short-term private money bridge loan that can carry them into the next year. They need the bridge loan because they promised their conventional mortgage broker that they’d contact Paychex or ADP to get set up on a payroll system at the first of the year once and for all. (I say this because I’ve gone through this process during the first few years of starting multiple businesses.)
Luckily for our clients, private money lenders really only care about occupancy (non-owner being preferred) and equity in the property. In this case, we had a rental property at 60% LTV with an experienced real estate investor so it was a simple loan for the trust deed investor to make.
Westminster California Private Money Bridge Loan Terms:
- $320,000 Loan Amount (60% LTV)
- 10.00% Interest-Only
- 12-Month Term
- No Prepayment Penalty