How Interest Rate Hikes Impact Real Estate Investing

When the Federal Reserve increases interest rates to curb rising inflation—as they have done in the past few months—a number of different property asset sectors are uniquely impacted. We’re not in the economic forecasting business, but we believe that investors in certain real estate assets – especially multifamily – can set themselves up for higher rental income during the current unpredictable economic environment.

 Multifamily Properties Are A Good Inflation Hedge

 While increased interest rates decrease the value of bonds and growth stocks, real estate assets are, historically speaking, usually more resilient to swings in interest rates. More specifically, revenue-producing real property and multifamily properties can increase net profitability during inflationary periods.

 Real estate has always been viewed as an inflation-resistant asset class. A 1979 study conducted by the Wharton School of the University of Pennsylvania indicated that the average dividend income from REITs outperformed inflation during 306 of the 404 months of observation. And an analysis of 43 years of datareviewed by NCREIF Property Index showed that the returns associated with private real estate assets were significant during years when inflation increased. For example, in 2021 when inflation rates outpaced the national GDP growth by over 0.5%, the NCREIF Property Index indicated a promising annual returns rate of 12.1%.

 Investment properties will continue to be an effective hedge against inflation. Higher mortgage rates essentially mean that would-be homebuyers are forced to rent. These higher rates, coupled with continued low inventory (housing development is still struggling with the after-effects of the pandemic and construction remains constrained because of high costs and tough local Bay Area permitting requirements), mean property owners have the power to charge a premium on rents and can expect a steady stream of well-qualified tenants willing to pay optimal price points for the right property. Data compiled by CoreLogic indicates that the nationwide average rent spiked over 10% in 2021 and is expected to increase for the foreseeable future.

 Investors Will Have Opportunities In The Near Future

 We recommend that investors continue to closely follow the Federal Reserve’s inflation strategy. The Fed is expected to increase benchmark rates another 75 bps this week (Nov 2nd) which should further slow down the overall RE market. Again we’re not in the forecasting business, but the interest rate futures contracts trading on the CBOT seem to imply that the Fed intends to stop rate hikes in mid-2023. Note that investors in these futures have usually underestimated the degree to which the Fed tightened. Nonetheless, the Fed doesn’t want to trigger a deep recessing by further increasing short term rates too rapidly.

 As we all know, RE values – especially SFR home values – in the Bay Area have already dropped since the end of the summer. According to mortgage-date provider Black Knight, Inc., home prices in San Jose fell 13% in August from the 2022 peak, followed by San Francisco with an 11% drop.

 While this economic backdrop is challenging, we expect savvy investors will have opportunities this winter to acquire assets at attractive prices.

 A Financial Partner Committed to Your Success

 Put simply, despite a volatile global market, privately owned, well-managed real estate assets have, and will continue to, produce consistent returns on investment. Having a trusted lending partner with a track record of facilitating profitable investment ventures of all shapes and sizes is a must for savvy real estate investors looking to diversify their portfolios and build generational wealth. Since 1943, Security Financial Services have provided mortgage brokers, developers and investors acquisition, rehab and refinance loans secured by property throughout the Bay Area and Northern California. Our team of professionals has the requisite experience and insight to develop viable and innovative funding solutions for your next investment project—contact us today to get started!

Market Update: California Commercial & Mixed-Use Properties – Solid Investment Options

Are you planning to diversify your investment portfolio with a mixed-use or commercial property located in California, but are hesitant to do so given the turbulent economy and unpredictable real estate market conditions?

 Let’s start with the good news: California commercial and mixed-use properties are still viable investment options with tons of potential upside and will continue to be sustainable revenue-generating assets for the foreseeable future. Why, you may ask? The team at Security Financial Services have compiled the following overview of some of the key benefits of mixed-use and commercial properties from an investor’s perspective to help you decide if you should add them to your investment strategy.

 The Mixed-Use Concept

 Mixed-use properties offer space for both residential and commercial tenants. A typical set-up is office or retail spaces on the first floor with residential spaces situated above. Urban planners are increasingly incorporating mixed-use properties into new development projects to maximize utility and efficiency—creating value for all parties involved and resulting in a close-knit, communal vibe.

 Here are some of the top advantages of mixed-use properties that make them the ideal investment asset:

 ·         Sustainability & Economic Enhancement: Mixed-use properties enhance local economies by facilitating more foot traffic to businesses. These properties perform well in areas with accessible public transportation, as residents and workers can simply walk from their home to their occupation. Walkability is a huge factor when it comes to drawing potential tenants for investors, and the mixed-use concept certainly boosts this aspect. As an added bonus, mixed-use initiatives commonly repurpose dilapidated older structures, a greener sustainable alternative than building from the ground-up.

 ·         Optimal Return on Investment: Mixed-use properties generate more favorable return on investment (ROI) compared to other property categories. An investment in a mixed-used building is inherently diversified—split between commercial and residential tenants. This lessens the risk profile of the asset as there are several tenants as opposed to a single one, meaning that even if there is a vacancy, the property still generates a profit. Having multiple tenants also translates into a higher overall income and lengthier leases. More money and less hassle finding new tenants every year? Sounds like a win-win to us!

 ·         Increased Demand & Efficiency: The reduced dependence on having a vehicle in neighborhoods with mixed-use buildings promotes interaction between residents. The shared spaces facilitate social mingling among residents, workers and customers. This produces a community-centric feel that is appealing to new tenants and businesses looking for a new space to do business or reside. What’s more, commercial tenants from complementary industries can form mutually-beneficial relationships in which they drive customers to one another—think like a gym being co-located with a supplement store. Successful, satisfied tenants equals less turnover and stress for property owner investors.

 Start Your Investment Journey Today!

 Founded in 1943, Security Financial Services (SFS) is an established real estate lender headquartered in San Francisco. Throughout both good times and bad, we’ve provided mortgage brokers, developers, and investors acquisition, rehab, or refi loans secured by property throughout the Bay Area and Northern California. We offer the most competitive pricing and terms for private money loans in Norther California with the added ability to close in a fraction of the time it takes for conventional lenders. Because we are a direct lender, we handle the entire underwriting and servicing processes entirely in-house. The result? Uncompromised service to our clients. Ready to experience the SFS difference? Contact us today to learn more about how we can assist you in realizing your investment goals!

Attention Real Estate Investors: Understanding the Role of Proof of Funds

A key initial task required to kick off your real estate investment journey is obtaining a proof of funds letter. Working with a trusted private money lender like Security Financial Services (SFS) is an ideal way to do so and indicates to future property sellers that you have reliable access to the funds needed to substantiate your bid. Because the majority of real estate investment transactions are relatively fast-paced and sellers prefer a streamlined process, it is essential to first acquire a proof of funds letter prior to submitting an offer on a property to gain a competitive advantage over other bids.

 The experts at SFS have drawn from their years of industry experience to provide the following breakdown of what a proof of funds letter entails, how you as an investor can obtain one, and a gameplan for what to do once you have it secured.

 Why is a Proof of Funds Letter Required?

 There is a common misconception in the beginner investment community that they can place a bid on a property before linking up with a private money lender to assist them in developing a viable financing plan for the planned transaction. In today’s ultra-competitive market, this approach is less than ideal and will likely result in you losing out on promising investment opportunities. A proof of funds letter makes your bid appear more credible and stand out from the crowd if there are multiple competing offers. This document is essentially a form of leverage, if there are two competing bids for the same property, but only one party can offer official proof that they have the money to secure the deal already, then the seller is most likely to accept their offer. Having the ability to showcase that you are a viable investor with the requisite buying power to proceed to the closing phase of the transaction immediately places you in contention for locking in the best deals on the market.

 Acquiring a Proof of Funds Letter

 It is a relatively simple process to acquire a proof of funds letter. Private money lenders typically ask for certain background information and a minimal one-time fee. Lenders want to ensure that the capital they provide has a planned investment purpose that has the potential to produce solid returns. Commonly requested information includes the property address and the planned purchase price for the subject real estate asset. You can increase your odds of obtaining the proof of funds letter by including a well-planned exit strategy and comprehensive investment model.

 Next Steps

 Armed with your proof of funds letter, now you are prepared to bid on an investment property. Investors often search for short sales where multiple foreclosure properties are presented to potential buyers. Knowledgeable investors can purchase these distressed properties at below-market rates, which is ideal for fix-and-flip projects. After locking in the deal, it’s time to inform your lender and plan how and when the loan will be disbursed.

 Get Started Today!

 Now is the time to chase down your real estate investment goals. Founded in 1943, Security Financial Services has established itself as the premier real estate-focused private lender in Northern California and the Bay Area. We offer the most competitive pricing and terms for private money loans and our streamlined approach means that you will have the money you need in a fraction of the time it takes for conventional lenders. The commercial real estate industry requires innovative and flexible funding solutions—which is exactly what the team at Security Financial Services delivers. Contact us today to learn more about how we can help you!

Important Factors to Consider for Multifamily Investing

Are you ready to diversify your real estate investment portfolio with a high-performing asset? If you are currently searching for your next investment move, a multifamily property is a great option to consider. The team of financial experts at Security Financial Services (SFS) have years of experience assisting investors getting started in the multifamily sector and have compiled the following overview of what investors need to know when determining if this type of property is the right fit for them.

 Multifamily Investment Property Basics

 First things first, what exactly is a multifamily property? Essentially, this property type is any residential structure comprised of multiple individual living spaces with their own kitchens and bathrooms. Typically, these come in the form of apartment complexes and can range from relatively small duplexes with two units to towering high-rises with hundreds of apartments. SFS specializes in providing short term financing on multifamily properties with anywhere from 2 to 20 units.

 Advantages of Investing in Multifamily Properties

 1. Optimal Cashflow

 A primary benefit of making an investment in the multifamily space is the stable monthly cashflow these properties generate in the form of rental profits. Whereas single family residences only produce a single stream of income, multifamily properties have several tenants all paying rent every month. Even if an unexpected vacancy occurs, multifamily investors can still make a profit from the other rented units while working to fill the empty one. That is simply not the case with single-family properties, where if the tenant abruptly leaves investors are left with zero profits.

 In addition, tenant demand for multifamily units has recent increased. Home ownership has subsided somewhat because higher interest rates has made home mortgages less affordable – encouraging would-be home buyers to continue renting.

 Still, investors need to be thorough when conducting their due diligence and ensure that their rental income will cover their net operating costs (including mortgage fees, insurance, maintenance expenses, etc.) while still being profitable.

 2. Financing Opportunities

 Multifamily buildings typically cost significantly more than single family properties in the same geographical market, but the good news is that it is easier to lock in flexible financing options to make a multifamily investment. Multifamily properties boast an inherently lower risk profile when compared to other property types from a lender’s perspective – multifamily has more resilient cash flow. This means investors can often lock in lower interest rates for multifamily investments. For instance, if you have ten units and one of them moves out before their lease ends, your overall income only falls 10 percent until you can fill the vacant unit. If that happened in a single-family rental property, an investor would have no safety net to cover their operating costs until they found a new tenant.

 3. Options to Expand

If you are planning to significantly build out your real estate investment portfolio, adding in multifamily assets is a much more efficient approach than concentrating solely on single-family properties—which you will have to purchase one at a time. Multifamily holdings additionally enable investors to branch into the commercial real estate niche, as the bigger housing complexes (5+ units) fall into this sector which offer an enhanced cash flow prospectus and higher overall passive income.

4. Tax Breaks

Acquiring a multifamily investment property allows investors to take advantage of beneficial tax benefits. Property owners can write off expenses associated with maintaining and operating the asset, to include costs for utilities, property management, insurance, maintenance, renovations and even marketing initiatives. From a long term perspective, investors can also leverage depreciation and cost-segregation tax breaks as the property and appliances get older to reduce their tax obligations and improve their bottom line.

 A Trusted Lending Partner in Northern California

 One of the most essential components of successful real estate investing is dependable, efficient access to the capital you need to close on promising investment assets. That’s exactly what Security Financial Services has to offer. Founded in 1943, Security Financial Services (SFS) is an established real estate lender headquartered in San Francisco. Throughout both good times and bad, we’ve provided mortgage brokers, developers, and investors acquisition, rehab, or refi loans secured by property throughout the Bay Area and Northern California. Call us today to learn more about how we can help you diversify your investment portfolio with an income-generating multifamily property!

Best Northern California Real Estate Investment Markets for Single Family Rehabs

Out of all the industries that underwent change, challenges, and growth over the course of the COVID-19 pandemic the past two years, the real estate market has been a true outlier. The historically resilient economic sector has seen some notable shifts in terms of activity and trends, but aggregate yield and potential opportunities have remained consistently high. As the economy begins to stabilize in the post-pandemic era, real estate investors still have the chance to capitalize on the favorable market conditions—particularly in the single family rehab space. Here's a closer look at some of the best performing Northern California real estate markets to help you kick off the search for your next investment project.

Sonoma

 With consistent economic growth and proven resiliency to economic turbulence for the past three decades, Sonoma is the ideal location for real estate investors seeking stable returns in one of the most in-demand California markets. Although the median home price is well above the national average, it is relatively affordable compared to the exorbitant costs of the San Francisco and Bay Area markets. There are plenty of available single-family properties on the market that are viable rehab projects. Over the past five years, the average value of a Sonoma single-family home has increased from $342,900 to $755,200—an extremely promising rate of appreciation. With the population growing by 8.4% over the past six years and showing no signs of slowing down anytime soon, it’s safe to say that single family rehab investments will continue to produce solid return on investment well into the future.

 Sacramento

 If you’re a numbers person, then the Sacramento real estate market data definitely makes it a place to consider for your next single family rehab investment. Property values have appreciated 17.1% in the past year alone, with the average single family home selling for $562,750—which is still an affordable price compared to other areas in California. What’s more, more than 76% of homes were sold in less than two weeks after being listed. That means real estate investors should have no problem in re-selling their rehabbed properties at a premium price point. As the sixth-largest city in the state with a 2.2 million-strong population base that is projected to increase by 54% in the next 30 years, Sacramento is a smart long-term investment that will garner investors sustainable return on investment for years to come.

 Solano

 Over the past decade, the Solano population has increased by approximately 6.95%--well above both the national and state averages. With average home values currently sitting at around $377,500, real estate investors have the opportunity to acquire single family homes to renovate at reasonable prices—and for those that are looking to rent out their completed projects, the gross median rent in Solano County came in at $1,498, which also beats out the state and national medians.

 Nevada County

 Ideally located in the scenic Sierra foothills, Nevada County is only an hour’s drive from both Lake Tahoe and the state capital of Sacramento. With easy access from Highway 49, the two main markets of Nevada City and Grass Valley have plenty of tourist attractions, restaurants and shopping that are sure to draw both visitors and aspiring homebuyers to the area. Dubbed “The Silicon Valley of the Sierras,” Nevada County plays host to over 50 major technology companies, making for an influx of well-paid and youthful workers all looking for flexible housing options that suit their lifestyles. Real estate investors focusing on single family rehabs will find a steady stream of qualified tenants and homebuyers, making Nevada County a perfect place to invest.

 Get Started Today

 Security Financial Services (SFS) has been assisting Northern California real estate investors achieve their goals since 1943. Because we use a dynamic funding structure comprised of our own capital and low-cost lines of credit, SFS can get you the capital you need to grow and scale your business in a fraction of the time it takes conventional lenders and with better interest rates than the competition. Contact us today to learn more about the advantages of partnering with SFS on your next investment project!

Why the California Multi-Family Market is Booming

The California real estate market is, and always has been, truly different and unique from other major national marketplaces. That trend has continued despite unprecedented factors associated with the global pandemic that has turned the entire industry on its head. Average home values skyrocketed during 2021 and have continued to increase in early 2022. Home equity positions have grown despite scores of analysts having predicted the exact opposite scenario, and demand for available housing options is growing more robust by the day.

Inventory – or the lack thereof – is the primary driver of California real estate scene; the effects of the pandemic have made new ground-up construction prohibitively expensive

The significant shortage in viable housing units is the main culprit behind the surging home prices—and inventory has only gotten worse during the pandemic. This is mainly due to the logistical challenges and increased cost and complexity of new construction. COVID-19 hit the construction industry hard, bringing the development of new housing complexes to a virtual standstill for months on end. Lingering supply chain issues, coupled with a hike in labor costs (from the shortage of construction workers), have only exacerbated the issue, making it prohibitively expensive for builders to break ground on new housing projects.

Property values will continue to climb until sufficient inventory is fully integrated into the market, which could take several years. In the interim, seasoned real estate investors have begun leveraging long-term exit strategies, such as diversifying their rental portfolios with the addition of more multifamily property assets. Their logic is sound, market factors linked to ongoing pandemic concerns make buy-and-hold approaches a more sustainable option at the moment than other shorter-term investment moves.

Because of extremely elevated home prices, more Californians than ever are renting

Due to a longstanding level of substantial demand – California’s metropolitan areas offer its residents high paying jobs and career advancement – and a chronic inventory shortage, home prices will continue to remain high. With some values ramping up by more than 30% in the last year alone, that dynamic appears to not be going anywhere for the foreseeable future. Subsequently, the average home value for California comes in at a hefty $819,630 based on a recent report by the California Realtors Association. While geopolitical events and the Fed response to inflation could create short term fluctuation, real estate prices appear to be retaining value for the long-term.

Climbing home values are dissuading many would-be homebuyers from committing to a purchase—or, at the very least, forcing them to temporarily put their plans to buy on hold. That means that there is a significant contingent of the population that are wanting to buy but don’t have the finances to do so, which is subsequently creating an almost identical supply and demand issue for potential buyers and tenants alike. Because more Californians are turning to rentals, both single- and multi-family options, there are fewer available options. Landlords therefore have enhanced leverage when it comes to setting rental fees—which is a distinct opportunity to maximize cash flow.

Based on data from Apartment List, the average monthly rental price in California is $1,861. Broken down based on property size, median rents are as follows:

• Studio: $1,377

• 1 Bed: $1,556

• 2 Bed: $1,891

• 3 Bed: $2,226

• 4 Bed: $2,639

Those are definitely very healthy rental rates. For investors looking to tap into this market trend by investing in multi-family properties, check out the following pros of this dynamic asset class:

• Consistent cash-flow

• Low risk profile

• Easily Scalable

• Tax Benefits

Get Started Today!

Ready to take advantage of a real estate market that is primed for multi-family investments? Security Financial Services (SFS) is an established real estate private money lender that has been assisting successful California investors for decades. Contact us today to learn more about how SFS can get you the money you need for your next investment in a fraction of the time it takes conventional lenders.

Why Sacramento is a Great Place to Invest

Regardless of whether you’re planning on acquiring your first rental property asset or you’re a seasoned real estate investor seeking to diversify your portfolio in order to optimize your cash flow, you should strongly consider the innate potential for above-average return on investment in Sacramento. The city is commonly overlooked due to its relative geographic proximity to more high-profile markets like the Bay Area and Los Angeles—but savvy investors that take the time to analyze the real estate market dynamics and forecasted trends in the greater Sacramento region will soon discover there are a plethora of great factors supporting the decision to make an investment there. Here is a closer look at what makes Sacramento an outstanding candidate for your next investment property

Affordability

It’s no secret that the California real estate market is one of the priciest on a statewide basis across the entire United States. Accordingly, the sheer financial barrier to entry for aspiring real estate investors may initially appear prohibitively steep, particularly for those individuals just starting out on their investment journey. It’s hard to blame them for this misconception. According to data reported by the National Association of Realtors (NAR), the average home value in California is $716,275—which is well over twice the national median. The good news, however, is that there are affordable properties on the market in the Sunshine State, you just have to know where to look. Sacramento—which is the capital city by the way—has a median property price of just $416,133 ($267 per sq. ft.). This is only modestly above the U.S. average, and well under the average in bordering local markets. Another bonus is that the overall cost of living in Sacramento is also significantly more affordable than other mainstream California venues. Sacramento comes in 26% lower than Los Angeles and 65% more affordable than San Francisco. This optimal affordability relative to its neighboring cities makes Sacramento the ideal spot for investors on the hunt for smart real estate deals.

Economic Prosperity

Put simply, the Sacramento economy is booming—and it’s not showing any signs of slowing down anytime soon. The diversified economy is bolstered by the presence of several major employers spanning many prime industries from education and agriculture to technology and healthcare. This translates into very low unemployment rates in Sacramento, a key metric to look out for when evaluating the viability of a given real estate market. Also consider that living in nearby Silicon Valley and San Francisco is becoming increasingly pricy. This trend has prompted a large number of workers to migrate to Sacramento, bringing with them an influx of new business activity and job opportunities. Real estate investors should thus have little trouble in finding well-qualified tenants to fill their properties, as the demand for housing is growing by the day.

Growing Population

Increased economic activity—which Sacramento is seeing plenty of—results in a corresponding uptick in the demand for flexible housing options such as rental properties. As more displaced workers make the move to Sacramento after having been priced out of more expensive markets like LA and San Francisco, landlords will see an increase in the number of viable tenants for their properties who are willing to pay a premium for the right accommodations. In the past year alone, the vacancy rate in Sacramento fell to a mere 2.88%--significantly below the U.S. median of 6.6%. Translation: real estate investors won’t have to worry about their properties sitting empty for long. With more than 53% of the entire city’s population comprised of renters, the opportunity to establish reliable, lucrative passive income streams is certainly there for the taking.

Take Action Now

Security Financial Services (SFS) has been assisting Northern California real estate investors achieve their goals since 1943. Because we use a dynamic funding structure comprised of our own capital and low-cost lines of credit, SFS can get you the capital you need to grow and scale your business in a fraction of the time it takes conventional lenders and with better interest rates than the competition. Contact us today to learn more about the advantages of partnering with SFS on your next investment project!

5 Commercial Real Estate Trends to Consider for 2022

1. Demand for Apartment Buildings in Major Urban Areas Will Increase

The implementation of covid vaccines throughout the Bay Area in the late spring and summer of 2021 has driven a reversal of higher apartment vacancy rates. In 2022, we expect multifamily rents to resume their average annual pre-pandemic growth rate in tech-focused areas of 2.8%. Data gathered by Realtor.com indicate that San Francisco rents hit $2,895 in mid-August 2021, which was a yearly increase of nearly 1.5%. That’s a drastic turnaround considering that in March 2021 San Francisco rents were 12.6% under the previous year’s totals. This growth appears to be here to stay in the Bay Area—particularly in the East Bay—as experts predict the locale is well on its way from fully rebounding from the temporary lag associated with the pandemic.

2. Rental Income from Residential Investment Properties Will Stabilize

Throughout 2020 and early 2021, Portland and other Pacific Northwest markets benefited as Bay Area based employees migrated in response to the pandemic and advent of remote working across nearly every industry sector. Since then, however, migration has subsided —and the local job market has recovered, increasing nearly 7% in the 3rd quarter of 2021 vs. the same period in 2020. Another factor driving higher rents is that entry-level homes in San Francisco remain some of the priciest in the nation. There is plenty of demand for rental units which explains the fact that vacancy levels are low—mainly due to the fact that around 56% of the Bay Area residential population opts to rent instead of buy.

3. Remote Working is Here to Stay

Twitter was one of the first major corporations to offer large-scale telecommute options for its employees. At the beginning of May 2020, the organization stated that employees who were able to work on a remote basis could do so indefinitely. Facebook along with countless other leading businesses soon followed suit. That trend hasn’t lost any steam. One thing is certain: the future of work will not be tied to physical office buildings.

4. Retail Market Will Rebound—In Specific Sectors

Although the surge of e-commerce ushered in by the pandemic has severely impacted brick-and-mortar retail properties, the lasting adverse impact many market experts projected may have been premature. Customers still want to dine in restaurants, get pedicures and conduct other in-person business transactions for goods and services where the human element remains irreplaceable by technology and online shopping. Still, investors should note that certain retail commercial properties like malls and outlets will continue to lag as these are the most negatively affected as buyers increasingly turn to the internet to do their shopping from once-popular in-person retailing suppliers.

5. Interest Rates Will Rise

Despite the recent surge in cases driven by Omicron, we believe the Federal Reserve won’t shift its policy in the coming months. Inflation will continue to exert upward pressure on historically low mortgage interest rates and the majority of economists are in agreement that the Fed will increase interest rates 75 basis points over the course of 2022. With the increase expected to be a gradual one over the course of the next 12 months, real estate investors should act early in 2022 to lock in still-low rates.

Get Started Today

Now is the time to chase down your real estate investment goals. Founded in 1943, Security Financial Services has established itself as the premier real estate-focused private lender in Northern California and the Bay Area. We offer the most competitive pricing and terms for private money loans and our streamlined approach means that you will have the money you need in a fraction of the time it takes for conventional lenders. The commercial real estate industry requires innovative and flexible funding solutions—which is exactly what the team of experts at Security Financial Services delivers. Contact us today to learn more about how we can help you get 2022 started off strong!

The Rise of Mixed-Use Properties

Mixed-use properties may be trending in popularity across the country, but it’s nothing new to the industry. In fact, up until the early 1920’s, most of the commercial development in the United States was focused on urban locations where mixed-use properties enabled residents to live and work in walkable communities. It wasn’t until the advent of cars that this set-up started to shift. The invention of the automobile allowed workers to escape cramped cities for the roomier abodes of the suburbs and forcing urban real estate investors to abandon their mixed used concepts.

Like everything else, real estate trends come and go. Currently, the pendulum has reverted to favor urban areas where there is a concentration of job opportunities, vibrant social scenes, and in-demand amenities—making mixed-used development an increasingly popular option for real estate investors.

What is a Mixed-Use Commercial Property?

A mixed-use real estate development is a combination of both residential and non-residential structures ranging from single buildings to entire communities. When properly organized and developed, mixed-use plans connect various types of real estate assets in mutually beneficial ways. Mixed-use properties come in numerous iterations, but they all integrate multiple uses within a single property (e.g., a ground floor retail with housing units in the upper levels). It can also refer to horizontal mixed-use blocks, in which individual units contain only a singular use but are situated on a black with a wide variety of land uses (e.g., an apartment building with a pharmacy store next door).

Why Mixed-Use is a Smart Investment Move

The mid-2000’s saw an uptick in mixed-use development on a national scale, as developers sought new approaches in blending urban-style living with walkable communities. There has been a resurgence in their popularity, bringing in domestic and foreign investors alike. All signs point to this being a trend that will last for the foreseeable future. Here are a few reasons why:

• Business Revenue: Mixed-use properties offer built-in customers for commercial outlets, opening multiple revenue streams for investors. In addition to generating both a residential and commercial client base, mixed-use properties draw considerable foot traffic compared to stand-alone structures.

• Management Efficiency: Property managers are accustomed to handling issues of multiple property classes simultaneously, streamlining business operations in the form of higher quality tenants, shorter vacancy cycles, more efficient processes, and enhanced support.

• Amenity Proximity: Mixed-use properties typically are situated near other amenities, making them desirable for residents. The modern homebuyer has a strong preference for central locations with convenient access to urban attractions, and mixed-use properties are aligned with this lifestyle.

• Reduced Risk Profile: The inherent diversity of tenants (commercial, residential, etc.) can mitigate the aggregate risk for real estate investors. Diversification in general allows investors to reduce the collective impact of underperforming assets by counterbalancing any potential losses. Regardless of whether the commercial or residential market takes a downturn, mixed-use developments are regarded to be a relatively safe investment move. Additionally, this asset class offers higher income potential, increased cashflow, longer lease terms and reduced competition—all favorable qualities from an investor’s perspective.

• Walkability & Transportation: Younger generations seek walkable communities, which could result in increased rental demand. A recent survey by the National Association of Realtors (NAR) surveyed over 3,000 adults residing in the 50 biggest urban markets to get a closer look at their transportation preferences. The study showed that the vast majority of Americans prefer walkable communities. Research also shows that more than 50% of Americans would either walk or bike instead of driving if they had the choice. Mixed use provides them with this chance. Dense, mixed-use developments enable people to lead more active lifestyles.

If you are looking for a loan on a mixed use property in California, Security Financial Services is here to help! Send us an email at lending@secfin.com to get started on the application process.

Benefits of Working with a Self-Funded Lender

All real estate investors seek reliable, high yield returns. No surprise there. Yet, more often than not, that ideal combination of consistency and optimized returns prove to be frustratingly elusive. Optimal deal economics oftentimes are driven in large part by the pricing, efficiency, and certainty provided by debt capital. That’s where relying on an established direct lender comes into play.

The Ins and Outs of Direct Lending

Direct lenders are unique because they both 1) tap their own capital resources to fund loans and 2) source their own leads/clients in house. Direct lenders utilize the funds raised from either investors or a line of credit to entirely finance a loan as opposed to syndicating it out to the conventional loan marketplace. This type of lending offers investors the opportunity to lock in quicker but still reasonably priced debt by eliminating intermediaries like banks and to capitalize on emerging, time-sensitive opportunities in what has become an ultra-competitive local Bay Area market.

Recently, the collective scope of the private debt market—of which direct lenders comprise a significant amount—has expanded exponentially. A study conducted by the Bank of America indicated that the private debt market has doubled over the past decade and is in excess of $700 billion in transactional activity. Because banks are extremely selective regarding what entities, individuals and projects they are willing to lend capital to, direct lending fills a pivotal void in the financial industry by providing financing to those who would otherwise be unable to access funds.

Borrower Advantages of Using a Direct Lender

Direct lenders like Security Financial Services offer several distinct advantages over conventional banks and classic hard money lenders:

• Overall speed & efficiency vs banks:

◦ In today’s increasingly competitive real estate market, time is of the essence to savvy investors looking to pounce on deals with a promising return on investment—especially when inventory is low, and demand is high. Conventional lenders take weeks to months on end to approve loans and disburse funds; also, some direct lenders will need to raise capital from outside investors to fund a deal, which is simply not acceptable for the modern-day real estate investor looking to be competitive.

◦ Security Financial Services has access to a syndicated line of credit which has been in place for decades and ensures quick fundings. For borrowers who have an immediate close or escrow or have a hard to finance property, we can close in as little as 3-5 business days. Our familiarity with the Bay Area market, flexibility and streamlined application and approval processes enables us to accommodate short deadlines and to provide certainty of closing.

• More attractive pricing & flexible terms:

◦ Security Financial Services is neither an expensive hard-money lender nor a unresponsive conventional lender. Thanks to our affordable lines of credit, we consistently are able to offer the lowest rates—starting from 5.95%. Because we are a direct lender, meaning we don’t have to consult with external investors to approve deals, and handle everything in-house, we are able to offer flexible terms and customized lending solutions to fit every need.

• State regulatory compliance & reputation:

◦ There’s a perception that private money lending is not regulated. While compliance isn’t as onerous as for conventional lenders, legitimate direct private lenders are required to be licensed. Security Financial Services was founded in the early 1940s and has originated business purpose real estate loans in California under a CFL license for decades. We undergo rigorous audits performed annually by the California Department of Financial Protection and Innovation (DFPI). We also pride ourselves on our reputation for professionalism that we’ve established for ourselves amongst Bay Area borrowers and brokers. When considering a direct lender, be sure to consider both the status of licensing and their reputation.

Contact us today to learn more about how we can help you achieve your real estate investment objectives without the hassle and expense of dealing with conventional lenders!

Northern California Multi-Family Property Assets: The Best Cities for Generating Revenue

The California real estate market is a focal point for a large contingent of domestic and international property investors. But where exactly should you focus your search for promising multi-family properties in the Golden State? As one of the most in-demand locations to reside and vacation in, the California housing scene is always an active one—regardless of how pricy it can be. Notwithstanding the tumultuous COVID-19 experience last year, the Northern California real estate industry proved remarkably resilient—and record-high metrics from Roseville to Sunnyvale in recent weeks lend credence to projections that the momentum will continue for the foreseeable future. With increased demand, dropping unemployment rates and exponentially rising home sale values, Northern California is gearing up for another booming year of activity—an opportunity real estate investors should jump on. Although California is notoriously expensive and it can seem daunting for those investors looking to break into the market, there are still plenty of areas where savvy investors can snap up lucrative rental properties and position themselves for long-term, sustainable financial success. The key is to start your search beyond the cluttered markets of major urban areas like San Francisco and Los Angeles. For multi-family property investors, concentrating your initial property search in Northern California is a great approach to find great properties at below-market values. To that end, here is a look at some of the most promising cities to acquire multifamily properties in Northern California.

 Sonoma County

 2020 finished up as a record year in the Sonoma County housing market. Attributable mainly to the pandemic-influenced migration around the country, the average sales price increased by an average of 8% from the previous year. Apart from COVID-19, the other two primary market conditions influencing multifamily property transactions are the reduced interest rates and elevated buyer demand. Potential buyers can now qualify from more square footage, and with the lower inventory hitting the market, things are becoming particularly competitive. As the economy opens up and unemployment levels steadily dropping, the Sonoma County market is looking promising. Aspiring real estate investors looking to capitalize on the increased demand for housing options in the Sonoma County area would be well-advised to fund their acquisition with a flexible hard-money loan in order to cut down on the closing timeline and start sourcing viable tenants from what is expected to be a well-qualified and abundant pool of renters.

 Mendocino County

 The rural Northern California commune of Mendocino County offers a plethora of recreational opportunities that are sure to draw plenty of both vacation renters and long-term tenants. The area is also experiencing the lowest inventory levels according to MLS reporting data since 2005—nearly 43% under last year’s mark. The average closing price of properties listed in Mendocino County in March was $515,000, which is a 10% net increase from 2020 and is directly correlated to the increased demand and lowered inventory that many markets around the nation are facing. This is an exciting environment for real estate investors, who can cash in on a healthy return on investment by purchasing multi-family developments now and marketing them to the numerous tenants seeking housing options in what is looking to be a crowded housing market for the foreseeable future.

 Solano County

 Based on recent market data compiled by Realtor.com, the Solano County real estate market was the third most active in the entire country during March based on the number of property showings, the transaction rate and number of active listings. The Solano County market is currently seeing an elevated level of competition amongst potential buyers and renters. Although there are tons of tenants looking for housing options, there is simply a significant shortage of available housing units. Real estate investors who locate promising multifamily properties would be ideally positioned to charge premium rent prices and select amongst well-qualified, reliable renters. This scenario translates into sustainable passive income and more money to fuel your long-term investment strategy.

 Transform Your Investment Strategy with Security Financial Services

 The time is now to get involved in the booming Northern California real estate market. With a wide range of custom-tailored funding options and a client-centered approach, Security Financial Services can provide you the capital you need to take your investment business to the next level. Contact us today to get started!

Why You Should Partner With a Private Money Lender on Your Next Small Retail or Mixed-Use Deal

The COVID-19 pandemic has had an unprecedented economic impact on virtually every industry and sector—some more than others. The resultant loss of rent on vacant or non-paying retail tenants has led in the substantial disruption of small retail and mixed-use property valuations. These market fluctuations have prompted a significant majority of banks to either pull back on their funding options for small business loans by imposing stricter standards or even halting lending completely due to the inherent uncertainty associated with the pandemic. That’s where private money lenders like Security Financial Services come into play. Our team of experienced and knowledgeable financial experts can fill the void in situations where banks and other conventional lenders are unwilling or unable to provide funding. Here’s a quick and handy overview of how Security Financial Services can assist property owners and real estate investors weather this challenging period and continue to maintain and scale their asset portfolio.

As most owners of small retail or mixed-use properties will tell you, even with a solid business strategy and promising revenue generation data it can still be extremely difficult to get approved for a conventional loan. Banks and other lenders are notoriously hesitant to extend debt financing to smaller investors who may not be able to provide substantial capital—with multiple industry research programs indicating that the approval rate for small business entities is well under 25%. That is why small retail or mixed use property owners are turning to private lending options to obtain the liquidity they need to operate—and for good reason: we can provide acquisition or cash-out financing for these clients at significantly higher loan-to-value (LTV) ratios than a bank would be able to provide on current income levels.

Our commercial private lending process is a great way to tap into a capital source for investors looking to act quickly on promising acquisitions. Our qualification criteria are much more flexible when compared to traditional financing and the Security Financial Services team is adept in crafting customized and innovative financing options to small retail and mixed-use deals.  We can provide you with the funding you need to fulfill essential short-term liquidity needs. Our loan options are intentionally designed for quick underwriting and efficient closing in order to align with your expedited timeline. In an increasingly competitive marketplace, partnering with Security Financial Services will give you a distinct business advantage, allowing you to quickly access to capital when you need it to make key acquisitions and improvements without having to worry about excessive paperwork and long waits.

Our dynamic bridge loan options can be used for commercial real estate owners for a wide range of uses, such as: putting a down-payment on a promising location, making needed tenant renovations and funding other expenses until you are able to obtain long-term take-out financing once the property is producing steady revenue. Conventional financing for virtually every property type typically requires a history of tenant payments. However, property owners may want to renovate a vacant property in order to incentivize high-paying tenants to provide a consistent stream of passive income after the property is stabilized. Our bridge financing offer you the financial means to complete the initial transaction and install reliable tenants, allowing you to pursue your investment goals without having to worry about the up-front costs of a project.

Our private lending financing options will be particularly relevant given the ongoing recovery of the Bay Area economy. With San Francisco on track to transition into the most lenient category of California’s pandemic reopening blueprint—the yellow-tier—the process of acquiring promising retail spaces will become increasingly competitive as more and more tenants are once again able to operate at full capacity and thus have the ability to make timely rent payments. As the vacancy rate drops, it will be all the more important for commercial real estate investors to have the cash on-hand to submit last-minute offers on in-demand spaces—a key ability the Security Financial Services team can provide you. Contact us today to learn more about how we can assist you in taking your real estate business to the next level.

Cash-Out Refinance on Real Estate Assets—Putting Your Equity to Work

Are you a Bay Area or Sacramento real estate investor looking to unlock the equity in your property? Did you know that a cash-out refinance can help youfree up funds for the down payment on your next acquisition, cover maintenance and renovations costs, or even free-up funds to open another business? Here’s what you need to know about the cash-out refinance loans and how to determine if it is a logical solution for your financing goals.

What is a Cash-Out Refinance?

Before delving into the details of how to obtain a refinance loan for an investment property, it’s a good idea to clarify what a cash-out refinance is and what the process entails. A cash-out refinance is a new 1st or 2nd lien position loan against your property in which you net loan proceeds into your bank account. In many cases, weprovide 2nd lien position cash-out loans behind existing long-term conventional 1st lien position loans. In that scenario, you can enjoy keeping the rate and term of your 1st lien position loan, while accessing your equity via the new 2nd lien position loan we provide.

To illustrate, say you own a $1,000,000 investment property, and you have an existing $450,000 in 1st lien position. By obtaining a cash-out refinance in 2nd lien position with us at up to 65% combined loan-to-value, you will receive $200,000 in cash that you can use for whatever business-purpose that you choose.

Do You Have Equity in Your Investment Property?

The more equity you hold the better positioned you will be in terms of qualifying for and utilizing the benefits of a cash-out refinance. Whether you own a non-owner-occupied single-family rental property, 2-4 unitsmall income property, 5+ unit multifamily property, or mixed-use property, Security Financial Services offers unparalleled flexibility. We provide both term loans (where the loan amount is fully disbursed upon closing) and non-revolving credit advance facilities (where the funds are advanced upon your request and you only pay interest on the outstanding loan amount). Our cash-out refinance loan amounts range from $100,000 up to $1,500,000. Generally speaking, rental properties with at least 30 to 40 percent equity are the best candidates for cash-out refinancing—especially if you purchased the property several years ago. 

What are the Advantages of a Cash-Out Refinance for Investors?

There are three main reasons why a real estate investor may find it ideal to complete a cash-out refinance on one of their assets:

• Cover Improvement and Maintenance Costs: One of the most common reasons that investors opt to refinance their initial mortgage is to complete needed improvements and renovations on the property. It’s a wise choice considering the fact that the more amenities the property has to offer and the more updated the property appears, the more rent investors can charge for the unit. From that perspective, if your property has seen some considerable wear and tear over the years or simply looks run-down, it may be a solid move to consider investing in a few updates such as putting in new hardwood flooring or updating the kitchens and bathrooms.

• Diversifying Your Real Estate Portfolio: If your rental units are already top-of-the-line, another potential option is to leverage the existing equity that you hold in the asset in order to expand your real estate portfolio. You can use the cash from your refinance to facilitate the acquisition of additional properties. Depending on the value of the property and how much equity you have built up, you could either use the refinance proceeds to buy a new property or put the funds towards the down payment.

• Funding Business Expenses: Looking to open up a second business? If you need to cover start-up or existing operational expenses in the near future, doing a cash-out refinance on your investment property is a savvy way to get the funds instead of getting more expensive business debt.

Am I Eligible for Cash-Out Refinancing?

First, take into account your combined loan-to-value (CLTV) ratio. In real estate, a CLTV is a measurement of your existing loan balance plus the proposed loan amount all divided by the property value, or, put simply, the amount of equity that you have accrued in the property. Security Financial Services generally will consider lending up to 65% CLTV and can offer flexible term options up to 60 months with a maximum two years fixed and the remaining term variable. Also keep in mind that if the property isn’t fully rented, the amount we will be able to lend may bedetermined byyour credit, income, and/or cash reserves.

Every situation and lender is unique. Here at Security FinancialServices, we have the industry experience and expertise to assist you in achieving your real estate investment goals. Contact us today to learn more about how we can help you fund your next acquisition or renovation by strategically leveraging your hard-earned equity.

Coming Out of the Pandemic—Where Should You Invest in Northern California?

When investing in single family rehab real estate projects, location is everything when it comes to generating a healthy return on investment. Working in the ideal area will enable you to find better properties that will offer you better odds of turning a higher profit when the time comes to sell. That is especially true in the current real estate market. Older retirees and young families alike are leaving the inner Bay Area and moving north in search of neighborhoods where they can get more square footage for their budget and have more access to the tremendous outdoor resources California has to offer. With the work-from-home model becoming increasingly popular for employees in all industries, professionals of all ages and demographics are in search of housing options in Northern California.

In a robust housing market like Northern California, investors often find it challenging to know if the area they are scouting for rehab projects is going to end up being the right one for them. That is why we have compiled this useful guide to assist you in determining which market you should target.

Sacramento

There are few cities better for Northern California single family real estate investors than Sacramento County. New statistics indicate that Sacramento leads the region in the number of rehab projects and was one of a handful of counties where the profit margin increased consistently year-after-year. Rehab projects accounted for approximately 7% of sales last year, a slightly higher rate than the 6.9% statewide total. This trend is largely attributable to the current market conditions in which consumers are eager to buy—as indicated by the fact that the number of days to rehab a given property fell in the Sacramento area by 10% in 2020. Due to the recent drop in interest rates, real estate investors are opting to relieve some of their inventory or choosing to finance the acquisition of their properties prior to starting renovations.

Sonoma

Despite state and municipal shelter-in-place mandates shuttering home sales in early 2020 by 30% across the state, the Sonoma real estate market experienced a window of opportunity in terms of both sales activity and increased home price averages. With more and more displaced tech workers from Southern California discovering they can live and work from anywhere in light of the pandemic, more and more homebuyers are flooding the region. Currently, builders, investors and real estate companies alike are concentrating on the up-and-coming Sonoma market, where the median sales prices are steadily rising—up 22% from last year—and the inventories are the lowest they have been since 2005. Market analysts are forecasting that single family rehab projects could account for roughly 15% to 25% of the county’s traditional housing market.

Solano County

Median sales prices in Solano County have trended upwards on an annual basis—a great indicator of potential opportunity when it comes to single family rehab investors. The current median property sales price is $675,000, significantly higher than the statewide average of $606,410. As the real estate market continues to rebound after the initial lockdown associated with COVID-19, essentially all experts anticipate that sales rates will increase significantly in the coming months as a result of the mass exodus of individuals from urban areas. Within Solano County, the Fairfield and Vallejo housing markets in particularly are seeing a rise in demand from buyers. The market is competitive, with homebuyers often waving their contract contingencies just to lock in properties. All this demand—which is expected to continue for the foreseeable future—is promising for real estate investors as it ensures that renovated properties will not linger on the market for long before being resold.

Nevada County

Interest from eager homebuyers in Nevada County is on the rise, as buyers and sellers who were initially hesitant to proceed with transactions at the onset of the pandemic gradually return to the marketplace. At the same time, the area has a substantially limited inventory, which functions to keep the average home sales prices elevated. According to a recent market analysis, the average price per square footage of sold homes in Nevada County is appreciating, jumping up 2.1% in March 2020 to April 2020 and increasing by 5.3% since 2019. The average price of sold homes is also increasing, rising from $420,000 in March 2020 to $460,000 in April 2020. On average, properties listed in Nevada County only stay on the market for 45 days, a substantial reduction compared to the 60 day median listing time in 2019. With the area experiencing a large influx of former city-dwellers seeking more room and less exposure to the coronavirus, Nevada County is the perfect place to plan your next single-family rehab investment project.

If you are looking for a private lender to help you navigate your next real estate investment in Northern California, Security Financial Services would love to be a resource to you. Since 1943, our team of experts are proud to offer the most competitive pricing & terms for private money loans in Northern California and the ability to close quickly. Reach out to our team today to learn how to get started.

7 Reasons for Getting a Private Loan with Security Financial Services

Here at Security Financial Services (SFS), we pride ourselves on providing borrowers and brokers in with the most competitive private money loan products in Northern California as well as friendly and attentive customer service. We understand that borrowers don't always have the time to research the best private lending solutions. 

Why choose Security Financial Services? There are several reasons:

#1. First off, we're not a hard money lender. 

In fact, we cringe when we're called a hard money lender because our business model is so different. Generally, classic hard money lenders will approve challenged borrowers and/or properties in poor condition. As a result, the lender charges exorbitant interest rates, points and fees and provide a loan with a lower LTV (loan to value). 

Unfortunately, many borrowers are mistakenly guided into accepting a hard money loan and don't realize that they qualify for much more favorable terms with us.  We reward borrowers who have solid (but not always stellar or consistent) income and credit with the lowest pricing for private loans in Northern California for years. We've also successfully cultivated relationships with a growing network of borrowers and borrowers. We don't view our closings as solely transactional in nature. 

#2. Lower pricing & higher LTVs/LTCs

We have a lower cost of capital – we use our own capital as well as funds we borrow from a group of banks - which we pass on to our borrowers. Our rates currently start at 6.95% for a 12-month loan and our LTVs are as high as 75% and LTCs (loan to cost) go up to 85%. 

#3. Quick closings. 

We have the ability to provide fast closings - as fast as 3 business days with a full loan package. We offer bridge loans (for up to 60 months) allowing borrowers to get a cash out refinance, make all cash offers on purchases to close quickly, improve/rehab and stabilize properties or a host of other purposes. We also offer loans to finance up to 100% of improvements.

#4. Experience. 

Our team has been underwriting loans for over 75 years. In addition to our underwriting savvy, we have the ability to creatively customize deals to overcome unique property or borrower circumstances.

#5. Knowledge of local RE markets.

We're based in San Francisco and are intimately familiar with real estate market trends, permitting issues, and the other nuances of acquiring or renovating property in Northern California. We're very likely to know the neighborhood or even the subject property. When you work with us, you'll be working with someone local, not a customer service representative at a call center outside of the area. 

#6. Dependability & Consistency.

Many lenders claim to have competitive terms and the ability to close quickly, but in reality they offer "low rates" and "quick closings" on only a fraction of their fundings. When we commit to loan or issue a Letter of Commitment, we always come through with a close.

#7 We're not a fund.

We're a direct lender using our own capital and we complete our own underwriting ourselves. We're not a mortgage fund that needs to raise capital funds or obtain a loan approval from outside investors.