“If you have saved enough to afford a comfortable retirement, congratulations. You’re in a tiny minority.”
That’s the way an article in the St. Louis Post-Dispatch on the current state of retirement preparedness starts. The article touches on a variety of common retirement investments – more on those in a moment – but it doesn’t include the strategy that many in our area are discovering: hard money loans on Los Angeles and other California properties.
Most individuals think in terms of “savings” when they consider retirement planning. Further, we start to get into the financial “alphabet soup” in this discussion, with terms like IRA, 401(k), 403(b) and other similar instruments. But the fact is that the average US household has just $3,000 in retirement savings, while experts agree that a person at age 67 should have at least eight years of income saved.
I could go on and on painting this bleak picture, but I’m probably telling most of you something you already know, or at least sense. So with this backdrop, three retirement topics come to mind. There are three topics because when we talk about retirement, we could divide people into three general groups:
– Those who have most of their working lives ahead of them to prepare for retirement,
– Those who are fairly close to retirement age, and
– Those who are at or in their retirement years.
Each group has different priorities and I want to show you how California hard money – through both investing and borrowing – can improve your retirement “savings” position. (I won’t be using the term “savings” as much as “investing” and “earning” as we get into our discussion of hard money.)
California hard money investing, borrowing: How it works
Let’s quickly set the stage. In the world of hard money, Los Angeles investors, for example, put their funds into first trust deeds. These are loans made to solid borrowers who typically have had a problem securing a conventional or bank loan.
At Evoque Lending, we generally make sure that the borrower is a good risk and has about 40 percent “protective equity” in the loan to help assure the safety our investors require.
Flip this around and you see how California hard money works for borrowers. Often they have gone through a rough patch that has hurt their credit rating, or perhaps they already have several loans and banks are reluctant to lend, despite a good cash flow. They find themselves needing a shorter-term loan to get into a property. Once in, they have time to work out their longer term plans.
Evoque lending is currently writing hard money loans in California that pay investors double-digit returns. They are interest-only loans and that helps keep payments manageable for borrowers.
Whether you’re coming to the topic of hard money lenders and loans from either the investor or borrower side, I’m sure you have additional questions. You’ll see that there are a wide range of articles here that touch on various aspects of the subject. But I want you to know that I always welcome questions. Please feel free to call me or drop me an email at any time.
With that said, let’s look at the three groups I referenced above and see how working with a hard money lender in California can improve their situations and help them be better prepared for retirement.
Younger individuals and families
If you’re in your 20s or 30s and feel like you have many years of good earning potential ahead of you, you don’t want to find yourself in the situation I referred to at the beginning of this article on California hard money investing and borrowing. You don’t want to be looking at a savings account balance of merely $3,000! However, you examine bank certificates of deposit and various money-market accounts and see that they are paying maybe one percent interest.
(Let me take a slight detour off our discussion of hard money loans on California real estate and explain the “rule of 81.” This rule says that to discover how long it will take you to double your money, take your rate of return and find out what number you need to multiply it by to get 81. For example, if you’re making 9 percent on your savings, it will take you nine years to double it. So if you’re only making 1 percent, it will take 81 years!)
Clearly, you can’t depend on a traditional bank or money-market account to prepare you for retirement, even if you graduated from high school or college yesterday and have all of your adult earning years ahead of you!
This prompts you to consider alternatives, such as the stock market, mutual funds and perhaps even precious metals. I’m all for a balanced portfolio, so I won’t slam any of those, however, I will point you toward the single investment that has been assuring the retirement of Californians for as long as there has been a California: real estate. This is where a hard money lender experienced in Los Angeles, Orange County and San Francisco are property can be very helpful.
Hard money loans and family homes
It’s no secret that the US economy has been going through some rough times and it has hurt the credit ratings of some good people. At Evoque Lending, we’ve worked with many of these families and individuals with California hard money loans to help them become established homeowners.
Because we are making private money, hard money loans, many California buyers have been able to work their way around loan refusals from banks and conventional lenders. We look more deeply than a credit rating number. We look at a borrower’s ability and willingness to meet his or her obligations as well as the equity in the property.
Let me take this hard money lending scenario one step further. If you already own your home, one of the smartest investments you can make is in residential real estate. With the historic appreciation of California real estate, this strategy has probably produced more millionaires than any other single investment – and it has certainly prepared thousands of families for their retirement years.
As with first homes, sometimes starting down this path can be difficult with conventional lenders. However, for a hard money lender in California, like Evoque Lending, it’s not the borrower’s credit rating that counts; what are important are ability to pay and equity. We work with many real estate investors, including folks who find great deals, do the rehab work and turn them around for a quick profit.
When you’re nearer the beginning of your career years, learning how to invest in California real estate can be your best path to wealth. In fact, if you’re conscientious about it, you may be able to “retire” well before the traditional age of 65.
Hard money loan investing as retirement grows near
If you’re like thousands of Americans, you may have seen your retirement “nest egg” go down or go “sideways” in recent years. Or perhaps you just haven’t had as much money to invest as you would have liked to have had during much of your adult life, and you don’t think you’ll have that recommended eight years of income saved up by the time you’re 67.
Many of our neighbors are finding themselves in these kinds of situations. They need a way to boost the return on their investments and since they’re getting closer to retirement age, they can’t chance the stock market; it might be at a low just when they need their money.
Working with a hard money lender experienced in California real estate can be the best strategy in this situation. As I said above, Evoque Lending is currently delivering double- digit returns for our investors. Further, because of our application and screening process, and our minimum equity requirements, these hard money loans – typically on Los Angeles, Orange County and Bay Area real estate – are structured with a good measure of safety and predictability.
Being able to get not only a high rate of return, but also a predictable rate of return on your retirement investments is crucial when your retirement years start to seem “not so far away anymore.” Among hard money lenders in the Los Angeles area, Evoque Lending has a proven track record with this group of investors.
Hard money loans and retired families and individuals
I started this out with the bad news about how so many Americans are unprepared for retirement. This is somewhat ironic because at the same time Americans are living longer than ever before. Better lifestyles and modern medicine are giving us extra years of health to enjoy, but unfortunately many don’t have the financial health to take advantage of those extra years.
Savvy investors don’t want to have much money in volatile stocks once they retire, even if they’ve set aside what they think is enough money. During the retirement years what’s important is the ability to maintain one’s lifestyle and be able to rely on a steady source of income. These two requirements are, of course, closely related to one another.
California hard money investments, because of their return and the way they are structured, can be the perfect strategy for retirees to maintain their lifestyle and achieve the monthly income they require.
Some of the points I made above bear repeating here. First, Evoque Lending hard money investors are getting double-digit returns, and the way this return is realized is perfect for retirees. When you make an investment in a First Trust Deed hard money loan on San Francisco property, for example, you receive a monthly check (or deposit to your bank account) for the amount of interest the investment is earning.
Retired individuals who are living off social security plus other retirement accounts find the dependable monthly income from their California hard money loan investments to be extraordinarily helpful. The money can be used to help meet living expenses, used for travel, or any other item that helps maintain their desired lifestyle.
Of course, when the bulk of your earning years are behind you, security in your investments takes on even more importance. I’ll remind you that Evoque Lending’s hard money loans on California property come with some 40 percent of protective equity. In other words, borrowers have a big chunk of their own money in the deal; should they default, they lose a lot of money. At the same time, that 40 percent means that it should be relatively easy to recoup your investment in any “worst case scenario.”
Wealth creation, wealth preservation through California hard money
I hope I’ve given you sufficient overview to show how hard money loans can help create wealth through your earning years as well as preserve your wealth and provide income when you choose to retire.
Preparing for retirement takes planning and persistence. I urge you to take that to heart and as you do your planning discover how hard money can greatly assist the investor and California real estate buyer.