Riverside County Fix and Flip Lenders

California Fix & Flip Lending Insights from a Local Lender: Zinc Financial

Below is a snapshot of an interview with Todd Pigott, President of Zinc Financial, a direct fix and flip lender based in Fresno…

Fix-and-flip projects in California have become extremely competitive, forcing investors to shift their strategy and adopt new approaches to ensure profitability, according to Todd Piggott from ZINC Financial. Todd explains that larger rehab projects, described as “heavy value-add,” are becoming more common. Investors are taking on bigger deals and more extensive renovations in prime locations like Laguna Beach and San Diego to create substantial value. “I think that it’s necessary today that you have to create value in that property as opposed to just doing a paint and carpet [job] and then selling it to earn money. Today, what I’m seeing is larger deals and larger rehab budgets,” he says.

One such significant value-add are Accessory Dwelling Units (ADUs), which has become a hot product among borrowers. Todd states that since recent laws now allow separating ADUs from the main property, it has given investors a beneficial way to enhance the appeal of their properties, while also creating much needed housing solutions for younger, single individuals and the elderly. ” I think ADUs are fantastic. There’s a lot of single people in California; the average age of marriage is now 29 and a half for males and 28 and a half for females. What we have here is this younger group that is not buying a house, getting married, and having three kids. They’re very mobile. They’re maintaining a single life and more of a socialite status. On top of that, we have a lot of elderly in the state. So the ADUs are providing a real spot for single people, unmarried people, as well as older people. So I’m a big fan of that. We financed many of them, and they rush right through our underwriting process. Because absolutely, it’s not only value-add, it moves quickly. It’s very, very helpful to the overall climate out here, ” Todd explains.

Todd cautions, however, that borrowers are encountering the challenge of a prolonged permitting process for their projects. He explains that the slow permit process, exacerbated by the shift to remote work in governmental agencies, is a major hurdle for borrowers. Permits that used to take weeks now take months, delaying projects. “Unfortunately, I believe that the remote aspect has slowed the process. They’re no longer in an office expediting that workflow. I think a lot of the governmental agencies have become a little bit hampered by some of these facets. So permits are an issue, and getting permits done is an issue, and that is dragging a little bit on our ability to function out there,” he stresses.

Another challenge borrowers are encountering is the lack of inventory, a situation common in most states across the country. However, Todd refers to the inventory shortage as a double-edged sword. While high demand can lead to a quicker and more profitable exit strategy, an excess of inventory may indicate a market slowdown. “Inventory is very difficult to find right now. It is out there; it just takes more work, but by that same token, your exit strategy is very, very strong. When there’s a ton of inventory, be concerned because your exit strategy is going to be very weak. That’s telling you that the market has slowed considerably. And to that effect, your exit strategy for repositioning and reselling that asset on the open-market has dwindled, ” he explains.

According to ZINC Financial, renting properties in California is not always profitable due to low rent-to-value ratios. Todd states that rental markets work well in specific coastal or high-demand areas but are problematic elsewhere. “We are seeing this multifamily going up with studios in one bedroom that are catering to the young mobile transient group. So that is working. But as far as buying a house and renting that, I don’t see that as likely in this state anytime in the near future,” he says.

ZINC Financial is one of Central California’s largest and oldest Private Money Lenders. They specialize in Residential Fix & Flip, Bridge, Cash Out Refinance, DSCR and Ground Up loans. They help investors leverage their capital to acquire, rehab, and build properties for investment purposes. Depending on experience, they provide up to 93% leverage on their loans. Their interest rates range from 9.99% to 11.99%, with a maximum loan amount of $1.5 million, although exceptions can be made for higher amounts. While Zinc Financial has a minimum credit score requirement of 660, they are flexible if lower scores are due to high trade line utilization rather than negative credit behavior.

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