Real Estate Financing

November 7, 2019

Potential Problems That Can Delay or Derail Real Estate Closings in California

by Bona Law PC

Real-Estate-Closing-300x200

Author: Staff

Buying and selling real estate in California is a complicated machine with many moving parts. Everything must be in working order before the deal can close. Most problems that arise in the days or weeks leading up to a closing might cause the machine to sputter, but the parties involved in the transaction can set everything back in order. Some issues, though, can cause big enough problems that they delay the closing date—or derail it altogether. This could be a major problem that changes the nature of the deal for the buyer or seller, or it could be a small problem that simply goes unnoticed for too long. For California real estate investors, knowing how to adapt to unforeseen problems is just as important a skill as knowing how to identify and avoid problems in the first place.

Title Problems

In almost any real estate transaction that includes mortgage financing, the lender will require title insurance. The title company will conduct a search of the property’s title history to look for anything that might affect the buyer’s—and therefore the lender’s—interest in the property.

Any defect in title raises the possibility of some third party asserting their own interest in the property. Liens, which give creditors a non-possessory interest in real property, are a common type of title defect. Before a closing may proceed, all title defects must be resolved to the satisfaction of the title insurance company.

May 13, 2019

Selling or Transferring California Real Estate that Is Subject to a “Due on Sale” Clause

by Bona Law PC

Author: Staff

Most real estate purchases require some form of financing. Banks that issue loans for the purchase of real estate protect their investments in several important ways. The most well-known is the deed of trust, by which the borrower conveys a security interest in the property to the lender. If the borrower defaults on loan payments, the deed of trust gives the lender the right to foreclose on the property. Most deeds of trust contain a “due on sale” clause, which is another way banks protect their interests. This clause limits a property owner’s ability to transfer title to their property. It is worth noting that enforcement of due-on-sale clauses is fairly rare, but it is still an important issue for California real estate investors to understand. property management

Due-on-Sale Clauses

January 19, 2019

Anatomy of a Commercial Real Estate Transaction for California Real Estate Investors

by Bona Law PC

Commercial-Property-300x200

Author: Staff

When it comes to choosing an investment property in California, real estate investors have a vast array of options. They can purchase a single-family dwelling and rent it to a tenant, or renovate it and flip it. They can purchase a multi-family dwelling or an apartment building for rental purposes. Commercial real estate offers even more possibilities, such as buying an existing office or retail building, renovating a commercial building, or purchasing raw land to develop from the ground up. Commercial investments often carry greater possibilities for revenue and profit, but they also often involve more risk, and more up-front work. The following is a general overview of the steps in a commercial real estate transaction. This hypothetical transaction involves the purchase of a property with the intention of renovating or developing it for commercial use.

Step 1: Find a Property and Build Your Team

Before you look at a single property, you should identify your goals and make a plan. Do you want to purchase a property that you can sell at a short-term profit, or do you intend to derive income from the property through rent payments? How much risk can you take on? How much time, effort, and capital are you willing and/or able to invest? Do you have investment partners? Are you putting together a real-estate syndicate? Do you need investment partners to contribute money or expertise? And so forth.

Next, you should visit many properties. Whether a property is “right” for you depends on your investment goals and your budget for both purchasing and maintaining a commercial property, among many other factors. Consider the current uses of these properties, and whether they fit your intended use or could be adapted to that use. Determine whether there are any uses that are prohibited for a property because of zoning or deed restrictions. Find out what permits you will need from multiple levels of government. Investigate each property’s potential for rent income, and the economic conditions of the surrounding areas. Above all else, find out why the owner is selling.
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October 18, 2018

Everything You Need to Know About Hard Money Loans

by Bona Law PC

Hard-Money-Loans-300x200 Author: Catherine Way, Digital Marketing Manager for Prime Plus Mortgages

Prime Plus Mortgages is a licensed hard money lending company. We specialize in hard money loans, or HMLs, for developers, property flippers and buy-and-hold strategists. Hard Money Loan programs make private money available for small to medium scale projects.

The early bird gets the worm: the sooner you can find and close on a golden real estate opportunity the better. That’s why it’s surprising that more real estate investors don’t use hard money lenders. What a lot of house flippers and real estate investors forget is that money makes the world go round. Having fast access to funds isn’t a need, it’s the lifeblood of almost every real estate investment transaction in this modern age. Hard money loans make it easy to get funded quickly, and get a house flipped even faster.

May 31, 2018

A Quick Guide to Title Insurance for California Real Estate Investors

by Bona Law PC

Author: Staff

Purchasing real property is a major investment, not only of money but also of risk. Even if a California real estate investor has enough cash on hand to pay the full price without a mortgage loan, they are still bound by property taxes, land use restrictions, and market forces. Most purchasers of real estate already know about these risks, though. A lesser-known risk involves defects, omissions, or fraud in the property’s title. This can lead to problems that are difficult to foresee, such as claims to the property by a former owner’s previously unknown heir, or difficulty in establishing ownership because of a defective deed. Title insurance covers many of these potential issues. Lenders often require borrowers to obtain title insurance policies in order to protect their investments. California’s laws and practices regarding title insurance can be rather difficult to understand at first.

What Is Title Insurance?

May 17, 2018

What San Diego Real Estate Investors Should Know About FHA Loan Rules

by Bona Law PC

Author: Staff

“House flipping,” which is the process of purchasing a residential property, making improvements to it, and selling it, has been particularly popular in recent years among real estate investors in California and around the country. It often involves purchasing distressed properties, such as those that are already in, or at imminent risk of, foreclosure. Investors can therefore purchase a property well below its market value, and with a bit of work—new coats of paint, new appliances, and such—sell it for a considerably greater amount. House flipping can be subject to legal restrictions, however, including local land use ordinances and lending regulations. The Federal Housing Administration (FHA), among other functions, insures many home mortgage loans. It also sets restrictions on residential properties when its mortgages are involved. These restrictions can affect house flippers who intend to sell to a buyer who needs an FHA-insured loan.

What Is the FHA?

October 30, 2017

Financing a Real Estate Development in California

by Bona Law PC

Author: Staff

Real estate investment in California takes many forms. An investor may, for example, simply purchase shares in a real estate investment trust (REIT), or they may contribute to a real estate syndicate. In those cases, the investor entrusts their money to others and does not get directly involved in the development or operation of the real property. Other investors might like to be more involved in the day-to-day workings of a development project. Either way, California real estate investors should have some familiarity with commercial real estate finance. The following is a very general overview, which assumes that the development project involves building a commercial shopping center on unimproved land.

Short-Term and Long-Term Loans

Real estate development typically begins with the construction of improvements and ends with a completed, fully leased facility. This lengthy process might require multiple stages of financing. Commercial loans can be broadly categorized as short- or long-term.

Short-term loans provide capital needed for the construction of the facility, as well as operating costs during the “lease-up” phase. This type of loan might have a comparatively high interest rate and might include a balloon payment. Short-term loans include construction loans, which finance the actual construction costs, and any bridge loans that might be needed during the construction and lease-up phases.
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October 18, 2017

How Dodd-Frank Has Affected Hard-Money Lending for California Real Estate Investors

by Bona Law PC

Author: Staff

Congress enacted the Dodd–Frank Wall Street Reform and Consumer Protection Act, commonly known as “Dodd-Frank,” in 2010 in response to the financial crisis of 2007 and 2008. Among the purposes described in the bill’s full title, Congress intended the law “to protect consumers from abusive financial services practices.” This includes provisions affecting the residential mortgage business. Dodd-Frank has led to numerous changes in how banks handle mortgage loans. It has also affected the hard-money lending market in ways that are likely to affect California real estate investments.

Hard-Money Lending

“Hard-money loans” are a means of financing a real estate purchase or development without many of the procedural hurdles associated with bank loans. Private businesses and investors offer hard-money loans on a shorter time frame, but with higher interest rates and other expenses. Unlike banks, which focus on a borrower’s ability to repay a loan, hard-money lenders usually look at the value of the collateral when deciding to make a loan. Dodd-Frank has created new obligations for hard-money lenders who loan money for residential properties in some circumstances. It has also potentially made this type of loan more appealing for commercial real estate.

Dodd-Frank

Title XIV of Dodd-Frank is entitled the Mortgage Reform and Anti-Predatory Lending Act (MRAPLA). It amends multiple existing statutes that regulate residential mortgage lenders, including the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Act (RESPA), and the Home Ownership and Equity Protection Act (HOEPA).
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October 5, 2017

Hard Money Lending for California Real Estate Investments

by Bona Law PC

Author: Staff

Real estate investing can be a lucrative source of income, but as the saying goes, one must spend money to make money. Obtaining a loan through a bank has many advantages, but the process can be slow, and a bank’s conditions for approving a loan can be steep. Investors who need a loan in a shorter time frame, or who are not eligible for a bank loan, might consider hard money lending. Hard money loans come from private companies or investors rather than banks. These loans could be advantageous for some California real estate investors, but they also carry certain disadvantages and risks.

What Is Hard Money Lending?

August 17, 2017

Real Estate Financing for California Real Estate Investors

by Bona Law PC

Author: Staff

The financial commitments required in real estate investing can vary in size and scope, from purchasing a handful of shares in a real estate investment trust (REIT) or real estate syndicate to purchasing a house or office building. The latter type of real estate investment generally requires a substantial outlay of cash. Very few individual investors have that kind of money on hand, but a prudent investor should always explore ways to avoid putting their own money at risk. Numerous resources exist for financing real estate investment purchases and projects. Real estate investors should carefully review their options. Identifying the best type of financing depends on the property or project, the resources available to the investor, and the investor’s goals.

Types of Real Estate Investments