A lot of investors were quite happy to wave good-bye to 2015. It was a confusing and unpredictable year for a wide array of traditional investments.
The Dow Jones Industrial average closed down 2.2 percent for the year as revelers were putting on their party hats on New Year’s Eve. By itself that news is bad enough, but it’s even worse when you put it in light of one of the most dependable stock market trends – the fact that the market usually goes up quite dramatically in years preceding presidential elections.
However, this time around, that didn’t happen and the outlook isn’t much better for 2016. A soft global economy doesn’t hold much promise for the financial markets and that will likely cause many investors to find better places to put their money – investments that give them a far better chance to achieve two goals:
– Higher returns, and
– More predictability
Because California is a state that finances most real estate purchases via trust deeds, this gives savvy investors the opportunity to enjoy high rates of return by funding California hard money loans. In fact, if we analyze what happened last year and looked at investing in hard money loans versus investing in an index fund like one tied to the Dow, hard money investors would have finished the year with a double-digit return on their money while the stock market investors would have finished in the red.
California hard money loans explained
If this area of investing is new to you, you might be asking, “What are California hard money loans?” Sometimes these are also called “private money loans,” and they are simply loans typically funded by private investors where the real estate is the collateral that secures the loan.
However, they differ from the real estate loans offered by banks and other conventional lenders in that they are generally for shorter terms (length of time) and offered at higher rates of interest. For example hard money lenders in Los Angeles often work with individuals who have had a problem securing a loan from a conventional lender. There are many reasons this happens – even to borrowers who are fully able to meet their financial obligations. Some common reasons include:
– Too many loans with a particular lender
– Overly tight credit standards, or
– A low credit score due to a previous financial mishap
Los Angeles hard money lenders, such as Evoque Lending, work with individual and institutions to fund shorter-term, interest-only loans so their real estate deals can go through. Sometimes they use the “breathing room” created by the hard money loan to improve their credit and later move into a conventional loan. Other times, they plan to resell their property by the end of the term of the loan. Frankly, there are almost as many different reasons and strategies as there are borrowers.
In any case, California hard money lenders have played an important role in Golden State real estate for many, many years. As you probably know, the real estate market here has produced more wealth throughout the generations than the “glamor” sectors of the California economy, such as the movie or technology industries.
California hard money investing
There are many ways individuals and institutions can benefit from the work we do at Evoque Lending, but let’s start with the basics, which is where this article began.
If you have any kind of investment portfolio – stocks, mutual funds, metals, bonds, etc. – moving some of your money into funding one or more California hard money loans is a strategy you certainly need to investigate. As I said at the top, our investors are currently enjoying double-digit returns on their money. I don’t think proponents of any of the other investment vehicles I just listed could say that.
Further, when investors decide to underwrite a First Trust deed, they know the return they will be receiving throughout their term of the note. By the way, investors receive a check or bank deposit equal to the interest payments each month. They can then use these funds in a wide variety of ways – more on that in a moment.
Many ways to benefit
As you can see, by working with a hard money lender such as Evoque Lending and funding First Trust deeds, California investors can lock in an excellent rate of return on their money. It’s an ROI that is beating most other investments and is far more predictable in the current uncertain economic climate than the typical investments available today.
It’s important to know that First Trust Deed (hard money) investing can be an integral part of many investment strategies. For example, for younger individuals at the beginning of their earning years, funding California hard money loans can be a great way to get their retirement accounts off to a swift start. At Evoque Lending we can help you make First Trust deed investing a component in virtually all of the major retirement accounts sanctioned by the government for tax purposes.
In the same way, if your retirement investment portfolio has taken a hit in recent years due to the ups and downs in the economy, California hard money loans can help you make up for some of that lost time. Of course, the closer you get to your retirement, the less uncertainty you want to have in your retirement accounts. Being able to count on a double-digit ROI as your retirement year draws close can make you sleep much easier at night.
And since we’re discussing the general topic of California hard money and retirement strategies, I think you’ll find that these investments are ideal when you actually begin to enjoy your retirement. For example, when they are able to receive a regular monthly income from their hard money loans, Los Angeles retirees are far more able to maintain the lifestyle that they enjoyed during their career years.
Institutions and money managers
So far we have discussed the benefits individuals can receive when they put all or part of their investment funds into California hard money loans. However, at Evoque Lending we have also found that institutions and professional money managers recognize the value of First Trust Deed investing.
If you are part of an estate, for example, you will want to realize a good return on its value and at the same time keep an eye on the safety of your investments. For these reasons, many experienced money managers have been putting a significant amount of the funds they are responsible for into backing California hard money loans. Further, if you ever take the time to pour over the investments of many of the biggest public retirement accounts, you’ll also find that they are heavily invested in First Trust Deeds.
The flip side of California hard money
So far we have discussed the benefits to investors. However, California hard money lenders also work closely with borrowers. After all, the primary job with hard money lenders such as Evoque Lending is to facilitate loans between qualified borrowers and investors.
Although the phrase “win-win” has become something of a cliché today, I think it truly applies to California hard money loans. Frankly, borrowers, investors and the general California real estate market all benefit greatly by the availability of hard money loans in Los Angeles, Orange County, the San Francisco area and the state as a whole.
Many times it’s only via a hard money loan that a Los Angeles area family can get into its first home. You probably know that due to tighter lending regulations and higher standards throughout the general lending industry, many good borrowers have been excluded from the market.
You probably also know that homeownership is the single most important factor in securing the financial future of a family. At Evoque Lending, we’re able to bring together solid borrowers with our investors to create a relationship that is mutually beneficial. Our investors enjoy a good rate of return while the borrowers are able to complete real estate transactions that would not happen otherwise.
Improving real estate
If you have watched the California real estate market for any amount of time, you know that when neighborhoods improve property values rise, and they can even rise higher than the average rate of increase.
California hard money lenders, like Evoque Lending, work with individuals and small companies that rehabilitate residential real estate. If you’ve watched any of the popular house flipping shows on cable television, you have an idea of how this works.
Banks and conventional lenders often will not fund these kinds of arrangements. The shorter-term, interest-only hard money loans that California lenders make can be ideal in these situations. Again, the flippers benefit, the investors benefit, and the neighborhoods and surrounding property owners where these homes are located benefit.
Other residential real estate investors are also our clients at Evoque Lending. Sometimes they need to take out hard money loans on existing property they own to make improvements or fund a purchase elsewhere. Because of our experience, we can make timely decisions and quickly fund hard money loans, enabling real estate investors to enact their plans.
Understanding safety and California hard money loans
Whether you’re looking at hard money loans from the investing side or the borrowing side, you’ll want to understand what California hard money lenders do to assure the safety of their First Trust Deeds. Further, if you’re considering California hard money loans as an investment, you need to know that at Evoque Lending you always have the final say on any First Trust Deed you decide to fund. We provide you with the information you need to judge which deals are best for you and your plans.
The approach and measures we take to assure the safety of hard money lending in California has two major components. The first of these concerns the borrower’s equity in the property being used as collateral for the loan.
Typically we insist on 40 percent protective equity before making or recommending a hard money loan. This means that the borrower has a significant financial interest in the property and that goes a long way toward giving our investors the peace of mind they need. Obviously, with this much equity in a property, the borrower has a lot a stake and can generally be counted on to keep up payments.
Along with the motivation to make payments, the ability and attitude to make payments are also important and these are the other areas we assess at Evoque Lending when we evaluate an application for a hard money loan.
With more than 15 years in this business, we are experts in vetting potential borrowers. Unlike banks and conventional lenders, we look beyond a simple credit score. We understand that sometimes qualified borrowers can have an incident in their past that will pull down a credit score. Our analysis looks at the ability and willingness of a borrower to meet his or her monthly obligations.
If you want to know more about hard money, Los Angeles residents and others throughout California, should give me a call or drop me an email. Whether you want to boost your investment portfolio or apply for a loan, let’s work together to make 2016 a successful year for you.