Attention San Francisco Bay Area Real Estate Investors
Are you looking for construction loans? SFR Ventures Inc. (my hard money lending company that specializes in construction loans) works with investors and we help facilitate hard money and construction loans. We have the ability to fund 1st and 2nd trust deeds. We also have the capacity to fund GAP funding, sometimes called SAMs (Shared Appreciation Mortgage).
In order to attract hard money capital, one must make yourself attractive to the money lenders. A critical step for success is your credibility package:
- Introduction or Executive Summary
- Your bio or story, including your picture, plus
- Resume (optional)
- Before and after pictures of previous flips
- Spreadsheet summary of a specific project; how did it go?
- Spreadsheet listing of your past projects
- Letters of endorsements, recommendations and referrals.
After you have put your credibility package together, the next step is to put your deal package together.
The package should include an introduction with an executive summary, as well as:
- A complete project spreadsheet
- Detailed line-item construction budget
- List of team members, including your contractor and Realtor
- Pictures, drawings, etc.
- Purchase contract
- Preliminary report
- Estimated time to complete
It is usually not the time to provide an appraisal. However, a detailed CMA, prepared by a competent broker, would be important to put into the package. Every lender has different approved appraiser lists, and it is wise to wait until you know what the private money lender will require.
How do you structure a hard money construction loan in the San Francisco Bay Area?
How to get 100% financing.
It is important to say this first: Typically, from a hard money standpoint, on your first deal you will usually be required to put in 10% of the purchase price and rehab costs. Now, this does not mean 100% is out of the question. Here are a few deal structures I have personally used with notations and comments under each of them. I call these “cookie cutter” programs.
- Lender gives 70% of the purchase price. Typical terms for a deal like this is 10%, plus 3 points cost. (Still need 30%, plus rehab money).
- 100% funding with GAP funding. 70% of the purchase price with a hard money loan, 2nd lender lends the 30% difference, plus the rehab costs. The lender on the first trust deed have the same terms as the “cookie cutter” program. The second lender or “GAP funder” charges 10-12%, plus up to 3 points on the money funded. In addition, these lenders will share in the profits upon the sale. On top of the loan, the profit is shared 50/50 or 35/50, depending on various factors. Please note, when you have an established relationship with private money lenders, qualification and terms can be flexible.
- Contractor Partner: 70% 1st loan, 30% equity partner, Contractor floats rehab budget.
Be careful of your contractor’s cash flow. This can be risky!
Plans approved on property. Some lenders will determine loan based on the ARV (After Renovated Value).
These lenders typically lend to 65% of the future value. Often times, this can be the full purchase price. You will need construction costs and interest reserves.
These are some of the deal structures that can help you get your deals purchased and rehabbed.
As the market bounces back builders are on the hunt for dirt and are looking for hard money construction loans to fill the void of the banks.
San Francisco Bay Area Real Estate has a scarcity of homes for sale and as a result builders and developers are looking for land in the San Francisco Bay Area. San Francisco Bay Area construction lenders are now working with local builders and have begun to lend again for development deals in the Bay Area.
There is a fair share of lots for sale in the San Francisco Bay Area, which means this is an advantageous time for sellers to list their properties again.
We are a real estate firm in Walnut Creek with a focus on Bay Area land and construction loans.
This includes construction financing and private money loans. We utilize our knowledge and great people skills to help investors, brokers, contractors and owner/builders create successful projects. We also have other funding sources, such as: pension funds, banks and other lending conduits in the San Francisco Bay Area. This ensures the best deals possible for our Bay Area clients.
Heck yeah this is extacly what I needed.