Hard Money Lenders in Los Angeles and the Real Estate Market

Los Angeles remains a very attractive market for those who can afford it. The California Association of Realtors reports that home prices in Los Angeles have increased 6.1 percent this year to date and are projected to show a 6.5 percent gain for all of 2015. Meanwhile, in Los Angeles County, prices are reported to have shot up 5.4 percent so far this year. These figures include detached and attached single family homes and duplexes. Century City Real Estate Report says that some L.A. luxury neighborhoods have already passed the 2007 peak. This situation makes a wonderful market for hard money lenders, since many investors are rearing to buy, but they are leashed by miserable credit ratings and credit histories. Shunned borrowers turn to hard money lenders in their area who hand them the 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 an increase of 6.3 percent over the homes sold in 2014. Projections for 2016 are also for a 6.3 percent increase to a predicted 433,000 units next year.

In Los Angeles, some data sources, such as the California Association of Realtors, show that the median sales prices for single family homes and condos shot up 8.1 percent to $950,000 for the 2015 third quarter; a record high for the Greater L.A. area. Regions include Westside, Downtown and coastal cities like Malibu, but omit low-priced areas such as South L.A..

One way to understand real estate price cycles is to look at the building permit numbers. If developers are investing in new properties, as has been happening in the general Los Angeles area, it is a good sign that demand, and prices, are rising or keeping steady. Statistics shows a growth of 2.4 percent in building projects.

Observers are concerned that Los Angeles may be approaching another housing bubble, but William Yu, Economist for the UCLA Anderson School of Business strongly negated this prediction in a recent UCLA Anderson Forecast. Prices have shot (he said) in an already expensive L.A market only because of excessive demand and limited supply. This is no housing bubble but a hugely pricey and unaffordable situation where those with money either do, or would like to, invest. In fact, the market is mostly catering to the very wealthy. Typical reports show that builders and investors are looking to the high-end luxury market where potential profits far exceed the profit that an investor can realize from the average priced home. This kind of high-end residential development needs investors who have the right kinds of funds. Some individuals go to the banks for their loans. Other approach alternate traditional lending institutions.

What about those without money? Or with poor credit who are unable to procure a loan?

This is where hard money lenders come in.

Los Angeles hard money lenders

The Los Angeles money lending directory shows 56 hard money lenders and the listing grows all the time. Experts in the field know that there are many more who are listed in other places or remain unlisted. These (and other) brokers lend their personal funds to residential and commercial borrowers. The 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 his property as repayment.

Many investors rush to hard money lenders for their speedy turn-around (typically less than a week) and for the simple and easy procedure (merely a few papers and a handshake). They detest the high interest rates (double to those of the banks) and the low ratio-to-value loans (sometimes as low as 60%-50%). Many borrowers tend to get hard money loans for the immediate short-term future and then repay with bank loans or cover the rest with alternate funding. Hard money loans are expensive so most borrowers try to use them for as short a time as possible.

The Los Angeles hard money brokerage is diverse and vast. You will find lenders dabbling in all sorts of deals and lending to a variety of investors. Lenders also offer varying sums and for varying amounts of time. Since lenders work independently – after all, it is their own funds that we are speaking about – they set their own terms and schedules. If you go that route, make sure your lender is certified by the L.A. regulatory real estate Board and by the National Mortgage Licensing System (NMLS). Also look into his credentials and borrowing history. And best of all: have an attorney review all agreements before signing.

The bottom line is this…

The Los Angeles rising prices and tight inventory have driven more investors to the high-end market. Investors have run out of flips but there is a wider market for the higher-paying population or for wealthy foreigners. This type of inventory drives prices higher and is expected to shoot them higher still over the coming years as there is scanty new construction in the pipeline to meet demand.

For those in LA who want to make the most of this luxury market but lack the funds to do so, employing a hard money lending broker may be a feasible solution. This type of broker ignores the credit history and focuses on the asset. Luxury assets seem to have high potential. If the borrower can show the broker his ability of repaying and convince him of the value of his property, the borrower may be able to find an alternate means of landing a spot in LA’s luxury market.

The California Association of Realtors predicts that home prices will likely “grow steadily” in the end of 2015 into 2016. Many investors in Los Angeles are approaching hard money brokers to fund their immediate needs. How does this solutions sound to you? Feasible?

A Good Real Estate Letter is the Real Deal

It seems like I’ve written at least a couple of hundred real estate letters over the last year. So, it may surprise you when I say “I hate writing letters.” Writing for me is a stomach knotting, finger tightening, forehead creasing, gut wrenching experience. I guess that’s why I avoid writing them as often as I do.

However, there’s one good thing about the tortuous experience of writing letters and that’s this…I love what a good real estate letter does for my business. A good letter generates leads that can be leveraged into paying customers, customers who buy, sell and rent real estate. Nothing has had as big an impact on my real estate business as has a single, but well written letter.

I wish I could say that my letters are magical, but they aren’t. However, what I’ve come to realize is that somewhere along the way of becoming good marketer is that I learned the formula for letter writing success. Specifically, the letters are not about how good I am, but rather a reflection of how well I address the needs of the readers.

Real Estate Letter to Sellers

For example, most sellers want to sell their homes as fast as they can and for the most money they can get. So, my letters to them tend to emphasize the things that I do to effectively market their real estate; networking with agents known for always having buyers, spelling out the unique ways I’ll market their home (e.g., market to grad students, college professors, physicians, investors, law enforcement personnel, fortune 500 company employees, etc.).

I tell them the things that they want to hear and then deliver on what I promise. I also sell them on the idea that I’ll be available to them 24/7, while secretly hoping that they don’t call at 2:00 AM. But just between me and you I’d be okay if they did.

Real Estate Letter to Buyers

On the other hand, letters to buyers emphasizes finding them a good deal, no matter how long it takes. Of course you want to sell buyers homes as fast as you can, but you have to respect the fact that they’ll be spending hundreds of thousands of dollars, so a little patience is in order.

The difference between rushing a buyer into a home after only 2-3 three days of looking verses 2 weeks of looking before they find the perfect home is HUGE. In the first instance they’ll know that you’re all about you and that your main goal is to make a sale. However, in the second example they’re likely to think that you have their best interests at heart and are therefore good candidates for a lifelong relationships…and referrals.

Capturing A Readers Interest

Summarily, an effective real estate letter captures a readers interest and compels them to action. It starts with an attention grabbing opening line that makes them stop and actually think about what you have posed. That’s followed by a solution to their proposed expressed as a teaser. To get all of the specifics of your solution will require them to pick up the phone and call you.

But when it’s all said and done I still hate writing letters, but I love what they do for my business.

As Real Estate Market Sours, Courts Punish Delayed Projects, Relieving Buyers From Contracts

Back in the September 9, 2008 edition of The Wall Street Journal, as knowledge of the global financial crisis was both broadening and deepening, I predicted that of the myriad lawsuits being filed by real estate buyers in hopes of recovering their initial preconstruction deposits, among those with the highest probability of success were scenarios in which the developer failed to deliver the project on time.

While there is no sure way of testing this forecast, my sense is that for the most part, it is proving itself true. Take, for example, a recent opinion from the Eleventh Circuit — the highest federal appellate court with jurisdiction over Florida, and one which has been instrumental in setting the tone for the latest wave of real estate litigation. In Harvey v. Lake Buena Vista Resort, LLC, 2009 WL 19340 (11th Cir. Jan. 5, 2009), the Eleventh Circuit upheld the lower court’s order refunding deposits paid toward the purchase of an Orlando condominium, finding that the developer had breached the purchase contract by failing to deliver the unit in a timely manner. Notably, the Eleventh Circuit left the developer zero room for deviation from the promised two-year construction schedule. While the developer obtained a certificate of occupancy just five days after the two-year deadline, the court held that this was too late as a matter of law, even though the defendant testified that the extra five days were attributable to a matter outside of its control –the unusually slow processing of a necessary road permit.

Tellingly, in reaching its conclusion, the Eleventh Circuit sidestepped another issue on which the purchasers had prevailed in the lower court — that is, whether the developer had violated the disclosure provisions of the federal Interstate Land Sales Full Disclosure Act (ILSA) in failing to both register the condo with the U.S. Department of Housing and Urban Development (HUD) and furnish a federal Property Report to the buyers. As I have written previously, federal courts have been noticeably reluctant to rule for buyers on claims brought under ILSA, violations of which are often viewed as hyper-technical and immaterial in instances where a project is otherwise delivered according to a developer’s stated promises.

In contrast, it is easy to see why courts might have more sympathy for buyers in cases where construction has been unjustifiably delayed. The calculus is simple: the longer a building goes unfinished, the more time a buyer’s deposits will have been tied up in an unlivable and unsaleable project. And every day the real estate market remains mired in a historic slump only serves to exacerbate the downside to the buyer. The recent but unsurprising rash of lender foreclosure actions against developers tell a general tale of builders without funds to pay off loans, contractors, or subcontractors. This means that the many yet-to-be-finished projects around the country will miss the completion deadlines set forth under contract –if they get finished at all, that is.

As a practical matter, those buyers with potential construction delay claims who have decided that they are without the patience of Job are well-advised to assert their legal claims as quickly and decisively as possible. While construction delay may be a pathway to successful rescission of a purchase contract, generally speaking, the longer one waits to take legal action, the greater the chance that the developer will be able to argue that the buyer — by his or her own delay — has waived any legal claims.

Farming For Real Estate – How To Effectively Use A Blog To Market To Your Farm In Real Estate

If you have been farming an area with traditional methods you have probably been trying to service an area of two to three hundred homes. You probably send direct mail pieces several times a year, offering a free home evaluation or other marketing offer. Maybe you even go door to door a few times of year. Most of the people are either not at home or do not answer the door and you leave your card or notepad on their front steps.

Welcome to the new millennium. Farming can now be done using technology that will enable you to reach thousands of homes more easily and efficiently than you could reach just a few hundred previously. One of the very best ways to do this is by starting a farming blog.

A blog is a website that lets you write, or post, as often as you wish, and deliver your message to anyone who has either subscribed to the blog’s feed or who visits the website. With the click of your mouse your message can be in front of the homeowners in your farm at a time that is convenient for them to read what you have written in your post.

It is relatively simple to start a blog. They are available for free from some places or for a fee of less than five dollars each month from others. The blogs that have a monthly or annual fee will generally offer more choices and features than the free blog services. It is up to you and you should experiment with the ones you are considering.

You will want to give your blog a name that has meaning to the people who live in your farm area. Do not use your name unless everyone in the area knows you. It is better to use a name that is relevant to the neighborhood. My farming blog is called Plum Canyon Neighbors. When people receive an email message with this subject line they know that it is important information from me about happenings in their area.

Give blogging a chance as a way to market to your farm. You will find that it is so easy and effective you will be glad that you started one.

Real Estate Investing and Marketing – How to Screen Your Leads For Success

Regardless of whether you’re after short sales or ugly houses, making money in real estate investing begins with leads. Unless you’re just posting bandit signs and waiting for the phone to ring, you should have implemented some type of screening process to get the best possible leads landing on your desk (or calling on the phone).

The better you do at setting up your screening, the more time you’ll have, the less garbage calls you’ll field (which can be painful whether you’re doing it, or paying the bill to have it done), and the more you’ll only be working with potential deals – the dream of all real estate investors.

THE RULE: All leads are not equal, and all phone calls are not leads.

A successful marketing campaign is not one that generates a ton of phone calls. That’s actually just a ton of work. Work is different than business. You’ll find in your real estate investing that some marketing campaigns, like the yellow letter (yellow letters are explained below), will produce huge response rates, but also huge numbers of unqualified calls.

But, marketing in the real estate investing world isn’t only about response rates. We have a unique product which only appeals to a small percentage of sellers. We don’t want to talk to EVERY seller, just the right ones. The good news is that you can tweak the message of high response pieces like the yellow letter to provide exactly what we want…

OUR GOAL: To get as many non-deals to filter THEMSELVES out before we ever need to talk to them. Good marketing will allow people who don’t qualify to do the initial screening for you.

QUICK SIDENOTE TO NEWBIE INVESTORS: Don’t be afraid to lose leads… they’re only leads if they are willing AND able to do business with us. If, however, you want to take every last call to work on your skills talking to sellers… no problem… that’s perfectly OK… just plan on fixing your screening when you’re ready to focus on deals.

If you’re marketing to a demographic group (a bunch of people sharing some characteristic, like having expired listings or notices of default on their mortgages), you are starting the screening process by choosing what type of sellers (this works for buyers too) you want to market to.

From there, your marketing message (which can include the “piece” your sending, like a postcard, or the message you use on a recorded message or on your squeeze pages*) needs to include language to both further the prospect along if they qualify, and to allow the non-deals to disqualify and eliminate themselves.

(* Squeeze Pages are single page websites designed to screen, collect leads, and send them to you. They’re a cornerstone of real estate investing marketing – check out the resource box below for links to my Internet Marketing resources.)

Now, lets jump in to two real-life examples from my business, the post-it note and the yellow letter.

The “UGLY” Post-it Note

One of the things people know me for has been my prolific use of post-it notes. I didn’t invent the idea, but in the real estate investing world I’ve distributed more post-it notes than anybody, and I’ve tested the heck out of them..

The original post-it I used had a very effective, but generic message. It got us TONS of phone calls, and cost a mint for the call handling. Fortunately, the margins in real estate investing are high enough that it worked despite the “breakage” (a term for waste, in this case by having unqualified sellers calling).

There were deals for sure, but also a lot of sellers just looking to save a few bucks on Realtor commissions, or who had thought they had been specifically chosen, maybe because their house was so awesome and valuable (aren’t they all?).

I was specifically looking for houses in need of work to either rehab or flip to wholesale buyers. So I needed deep discounts and poorly maintained homes. Other callers would be wasting their time and mine. Real estate investing doesn’t pay by the hour, so this is less than ideal.

So here’s what I did. I added the following language to the post-it notes, creating what I call my “UGLY” Post-it:

P.S. If you want retail value, we’re not your guys. But, if you want someone to buy your house… (a list of benefits)… then we’re your guys. Contact us now… Can’t get much more to the point. If you want retail, don’t call us.

Why waste the time? Why deal with the uncomfortableness of telling them you want to pay 50 cents on the dollar or lease option their house subject to with no money down?

THE RESULT: It cut our calls in half, with no decrease in viable leads. This was huge, because I was paying a pretty high rate to a call center to process the leads… I only wanted to pay for actual leads, so this saved me a bunch, which means my Return On Investment (ROI) shot up. If you were taking the calls yourself, you just got a big chunk of your time back. Either way, a BIG win.

The Yellow Letter

The “yellow letter” is another top-performing marketing piece for real estate investing. The original yellow letter was created by investors John & Donna MacNeil, and later promoted by investing guru Ron LeGrand and others.

If you haven’t seen it, the yellow letter is a handwritten (or handwritten-looking) letter on yellow legal pad paper. It says something like “My wife Erin and I want to buy your house. Please call us at 555-1212.” If you haven’t seen it before, the yellow letter looks real enough to be creepy. And it does get a lot of calls… like:

* Upset people with bad tempers and foul mouths * Police calling on behalf of little old ladies * A random lead or two… and * Lots of people telling you that their house is NOT for sale

So, how to fix it? Easy… I just added the following to the end of the letter (before the signature and PS): If you don’t respond then I’ll assume your house is not for sale.

THE RESULT: Again, a HUGE drop off in calls, but not in leads. The yellow letter remains a top marketing tool for us, but now we don’t need to field the 70% of the calls who wanted to tell us that their house isn’t for sale.

If you want better efficiency with your time and you want to focus more on business than busy work, then start adding language to your marketing pieces to pre-screen the sellers who you are not going to be able to (or don’t want to) work with.