Los Angeles Rehab Lenders for Residential Rental Property

Los Angeles Residential Rehab Insights from a Local Lender

Investors in the city of Los Angeles continue to face challenges in the real estate market, similar to those experienced throughout the country, such as reduced inventory levels, low profit margins, and rate hikes due to inflation. According to Sam Chivitchian of Secured Capital Lending, investors are starting to seek other opportunities and think outside the box when it comes to residential rehab projects, simply because the market has drastically changed and it doesn’t seem like it will go back to the way things were anytime soon. “It’s not like prior years where you get a lot of these quick fix and flip, cosmetic type of rehabs where you can generate a good rate of return, those days I think are over. It’s more about getting creative, adding another unit, ADU or adding square footage or redeveloping something. It’s about getting good price points, buying the acquisition at the right cost to be able to create some margins,” Sam explains.

In efforts to increase the development for more affordable housing, legislators in the state of California have lifted some of the restrictions on multifamily projects, making it simpler to get approved for planning and development. According to Secured Capital Lending, the rising demand for more affordable housing has created a significant trend in addons such as ADUs (accessory dwelling units) and multifamily projects throughout the city. Investors and developers are starting to lean more towards these types of projects, seizing the opportunity to do more volume of units and generate more income, more cash flow. “In counties like LA county, you can actually not only have an ADU but you can even have a Junior ADU which is a third unit on a residential single family lot, where it allows you to take a single family house, build an ADU in the back and then convert a portion of the house up to 500 square feet into a third unit which is called the Junior ADU. This way, you can rent out to three different tenants and maximize your cash flow,” Sam explains.

Even with the state’s push for affordable housing, investors aren’t necessarily shying away from fix and flip projects, but they are being a bit more skeptical about the properties they seek. Sam states that as long as the property has good potential to make a decent enough profit, investors will still want to do the fix and flip deal. “It really comes down to being able to, for the rehab or flipper, to be able to give a good quality product, because with the interest rates being high, buyers are a little bit more calculated, more careful and more picky about what they’re going to get. So if you’re a rehabber, you want to make sure you’re making a good product. This way, the demand will be there. If not, you might have to sit on the market for a long time or have to drop your price and get crushed on your margins,” Sam suggests.

Secured Capital Lending, Inc. is a direct private lending company specializing in financing light to heavy rehab projects for both commercial and residential properties. They offer various attractive loan products such as fix and flip, rehab, bridge, construction, refi – cash out, 2nd trust deeds. On their rehab loan program they will typically finance anywhere from 75% to 90% of the purchase price, depending on the borrower’s experience level and track record, and most often will finance 100% of the rehab cost.

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