Los Angeles remains a very attractive market for those who can afford it. Tea California Association of Realtors reports that Los Angeles home prices are up 6.1 percent this year to date and are projected to show a 6.5 percent increase for all of 2015. Meanwhile, in Los Angeles County, prices are reported to have soared 5.4 percent so far this year. These figures include single-family detached and semi-detached homes and duplexes. Century City Real Estate Report says that some luxury neighborhoods in Los Angeles have already surpassed the peak of 2007. This situation creates a wonderful market for hard money lenders, as many investors are willing to buy but are tied down by credit ratings. and miserable credit histories. Declined borrowers turn to hard money lenders in their area who release funds based on their collateral.
Here is the Los Angeles real estate data for 2015-2016
The California Association of Realtors projects sales figures of 407,500 single-family homes by the end of 2015. This will be a 6.3 percent increase over homes sold in 2014. Projections for 2016 are also for a 6.3 percent increase. percent to the 433,000 units forecast soon. year.
In Los Angeles, data sources like the California Association of Realtors show that median sales prices for single-family homes and condos soared 8.1 percent to $950,000 in the third quarter of 2015; a record for the Los Angeles metropolitan area. Regions include Westside, Downtown, and coastal cities like Malibu, but omit low-priced areas like South LA.
One way to understand real estate price cycles is to look at building permit numbers. If developers are investing in new properties, as has been happening in the general Los Angeles area, it’s a good sign that demand and prices are increasing or holding steady. Statistics show a 2.4 percent growth in construction projects.
Observers are concerned that Los Angeles may be on the verge of another housing bubble, but William Yu, an economist at the UCLA Anderson School of Business, flatly denied this prediction in a recent UCLA Anderson Forecast. Prices have skyrocketed (he said) in a Los Angeles market that is already expensive only due to excessive demand and limited supply. This is not a real estate bubble, but an enormously expensive and unaffordable situation in which those who have money invest or would like to invest. In fact, the market primarily caters to the very wealthy. Typical reports show that builders and investors seek out the high-end luxury market, where the potential returns far exceed the returns an investor can make on a median-priced home. This type of high-end residential development needs investors with the right funds. Some people go to banks for their loans. Another alternative approach traditional credit institutions.
What about those who have no money? Or with bad credit who can’t get a loan?
This is where hard money lenders come in.
Los Angeles Hard Money Lenders
The Los Angeles Hard Money Lending Directory lists 56 hard money lenders and the list is growing all the time. Experts in the field know that there are many more that are listed elsewhere or remain unlisted. These (and other) brokers lend their personal funds to residential and commercial borrowers. Hard money lenders ignore the credit history and FICO scores of these borrowers, focusing instead on the value of their collateral. If the borrower defaults, the lender sells their property for repayment.
Many investors rush to hard money lenders because of their quick turnaround (usually less than a week) and the simple and easy procedure (just a few papers and a handshake). They hate high interest rates (double those of banks) and low-to-value loans (sometimes as low as 60%-50%). Many borrowers tend to take out hard money loans for the short-term immediate future and then pay them off with bank loans or cover the rest with alternative financing. Hard money loans are expensive, so most borrowers try to use them for as short a time as possible.
Los Angeles hard money brokerage is diverse and vast. You’ll find lenders doing all sorts of deals and lending to a variety of investors. Lenders also offer variable amounts and for variable periods of time. Since lenders work independently, after all, we are talking about their own funds, they set their own terms and schedules. If you go that route, make sure your lender is certified by the Los Angeles Real Estate Regulatory Board and the National Mortgage Licensing System (NMLS). Also look at their credentials and loan history. And best of all, have a lawyer review all agreements before you sign them.
The conclusion is this…
Los Angeles’ rising prices and tight inventory have drawn more investors to the high-end market. Investors have run out of flips, but there is a larger market for the higher paying population or wealthy foreigners. This type of inventory pushes prices up and is expected to push them even higher in the coming years as little new construction is planned to meet demand.
For those in Los Angeles who want to make the most of this luxury market but lack the funds to do so, hiring a hard money loan broker may be a feasible solution. This type of broker ignores the credit history and focuses on the asset. Luxury assets appear to have high potential. If the borrower can show the broker his ability to pay and convince him of the value of his property, the borrower can find an alternative means of obtaining a place in the Los Angeles luxury market.
The California Association of Realtors predicts that home prices are likely to “grow steadily” in late 2015 and into 2016. Many investors in Los Angeles are turning to hard-money brokers to finance their immediate needs. What do you think of this solution? Feasible?