The Top Perks Of Using Hard Money Loans
We previously mentioned that there are far fewer hoops to jump through when you opt for a hard money loan. Let’s take a further look at how hard money loans differ from traditional bank loans, and why they make an excellent option for funding.
They Are Flexible
Compared to traditional bank loans or mortgages, hard money loans don’t have restrictive guidelines. Hard money lenders look at the property you’re using as collateral rather than your credit score or past financial issues such as bankruptcy.
They are very speedy
Do you need fast hard cash to score a property in San Francisco right now? You don’t have to wait for months to be approved or receive your funds. Here at RTI Bridge Loans, you can snag a San Francisco property with funding as low as 3-5 days.
They provide funding for projects that would be immediately refused at traditional banks
Banks look at what you want to finance, and if it doesn’t meet qualifications, you simply won’t get approved. For example, fix and flip loans will more than likely get denied. Hard money loans also only do short-term loans – something that banks don’t like to do.
The Top Disadvantages Of Hard Money Loans
There are only a few reasons why people don’t like hard money loans. Nevertheless, it is still important to touch base on them. Here are the top reasons why people opt out of financing a hard money loan:
Equity is required, and down payments are high
Since hard money lenders look past financial blemishes or a poor credit score, they need a pretty high down payment (25-30%) or substantial equity in the property you own. Without doing this, your lender would be taking a considerable risk giving you the money.
The interest rates are pretty steep
They usually sit around 9-15%; this is because hard money loans are very short-term, so interest rates will naturally be higher. Since San Francisco is so densely populated, you can expect interest rates to be on the lower side due to competition.
They are short-term and considered a ‘last resort’ option
Hard money loans are only written for roughly six months to one year, and the longer the loan term is, the riskier things get for both the lender and the investor.
Real Estate Investment Opportunities in San Francisco
San Francisco’s real estate market is marked by high demand and limited supply, driving up property values. As of May 2024, the median listing home price is $1.2 million, with a price per square foot of $962. The median sold price is $1.1 million, showing strong investment returns. Despite being a buyer’s market, the sale-to-list price ratio of 94.6% indicates a competitive market that remains attractive to investors.
Types of real estate investments in San Francisco:
- Residential Properties: Investing in single-family homes or condos for sale in San Francisco can provide steady rental income and potential appreciation. Neighborhoods like Noe Valley and Bernal Heights are popular choices for residential investments.
- Commercial Properties: With the tech industry thriving, commercial real estate, including office spaces and retail units, offers substantial returns. Areas like SOMA are beautiful for commercial investments due to their proximity to tech companies.
- Multi-Family Units: Investing in multi-family properties like apartment buildings can yield higher rental income and spread the risk among multiple tenants. This is a popular choice for those looking to maximize their San Francisco housing market investment.
- Fix and Flip Properties: Buying properties that need renovation can be a cost-effective way to enter the market. After improvements, these properties can be sold at a higher price or rented out for increased income.
Top Neighborhoods to Invest in San Francisco, CA
Burbank, CA, has several great neighborhoods for real estate investment, each with its charm:
- 1. Mission District
- 2. Pacific Heights
- 3. Golden Gate Heights
- 4. Parkside
- 5. Richmond
- 6. Glen Park
