California Hard Money Lenders and Spec Construction Loans

California hard money lenders seem to be able to help borrowers and investors do the impossible, but what about for builders? If you have been in the business for a while, you know that most lenders do not rush to approve spec construction loans, but can the same be said for California hard money lenders?

Untitled-1The good news is that California hard money lenders are known for providing a helping hand when borrowers need it the most. Of course, this is not to say that every lender in California who offers hard money financing is willing to take a chance on Spec construction. If you do not know what Spec Construction is, it is basically construction that has no guarantee of making a profit once sold. More specifically, Spec loans do not have the requirement of having the debt ratios calculated.

Generally, most construction does not provide a clear indication of a profit, but with Spec construction, the end result is very much unclear. With that being said, you can see how any kind of lender or traditional lending institution would have some reservations about approving such a loan. What’s more, banks typically decline these particular loans without a second. But, as briefly suggested, lenders who work exclusively with hard money financing tend to have a different approach to Spec construction loans.

For instance, you can find hard money Spec construction loans surprisingly easy with competitive terms. The reasons that hard money lenders are willing to go out on a limb where other lenders won’t is because these particular lenders understand the nature of the construction business. In other words, sometimes you secure a Spec construction loan with no real profit margin insight and to your delight, you make more than enough profit. Other times, a builder or investor may barely break even. But, with incremental funding options, that builder or investor will more than likely be able to meet their terms and move on to the next venture that will hopefully allow them to recoup and profit.

Benefits of Hard Money Spec Construction Loans
Besides being able to secure financing for such an endeavor, the real benefit of hard money spec construction loans is that your lender is willing to work with you when it comes to your loan terms. For example, many lenders that offer this particular kind of financing offer no prepayment penalties, no seasoning of funds for closing, 24-month terms and much more. It is also important to note these lenders only care about the loan being paid off, not how you accomplish it. Thus, you have even more flexible than you would normally see with non-traditional lending institution or banks.

Things to Consider
Ultimately, you can see how hard money lenders can be a true lifeline in a variety of ways. Nevertheless, it helps to keep things in perspective i.e. a strong project means better funding, even bank funding if you play your cards right. Therefore, you should really take a look at your future Spec construction project and make an educated guess as to the outcome.

Happy senior business man making his notes at workDennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC 
Private Hard Money Lender

Arizona Tel:  (623) 582-4444
Texas Tel:     (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

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About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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