What is a hard money loan?
Is hard money considered cash?
Should you Pay Cash for an investment property?
How do you get pre-approved for a hard money loan?
Can you refinance a hard money loan?
What are construction Escrows and why private lenders use them?
What is the Average Interest Rate on a hard money loan?
How Fast Can I close on a Hard Money Loan?
How Do I Choose a hard money lender that is right for me?
2. Have some savings.
3. Choose a hard money lender that is direct
4. Select a private lender who is local
5. To find a private lender with a good reputation, look for reviews and referrals
6. Know the right questions to ask
7. Don’t chase the lowest rate
8. Look out for the red flags
9. Make sure you are free to select your own vendors
10. Your lender’s follow-up is an indicator of its future performance
11. Trust your gut
For more details, read here.
What Are the Risks of Working with Private Hard Money Lenders?
Pricing Bait-And Switch. Increasing rates and not disclosing fees until the very end of the process – when a real estate investor is forced to accept these higher costs or to lose a property – are two most common examples of the bait-n-switch tactics in private lending. Read more on how to combat unscrupulous pricing tactics here.
High-Costs of Carry A Private Loan. The longer you hold the loan, the more you pay the lender in interest. The more you pay in interest, the smaller your profit will be. Here is how to put more money in YOUR pocket, not LENDER’S.
Inefficient Draw Disbursement And Management. Typically, your lender will set up an escrow account that will be used to finance the renovation of your investment property. The construction funds will be dispersed back to you in predetermined draws as your complete certain stages of renovation. It takes two to tango, and the efficient management of your construction escrow funds depends on the lender and the borrower. Clear communication before and after the closing is the key. Read more about how to avoid issues with escrow accounts here.
Unrealistic Exit Strategy. In private lending, exit strategy refers to how a private loan is paid off. There are two ways to pay off a loan. One is to sell the property, and another is to refinance it with another lender. Both exit strategy have their own risks. For example, if you are planning to sell your property, but price it unrealistically high, it will sit on the market while you continue to pay interest on your private loan. If the exit strategy is to refinance a loan with another lender, the borrower need to be aware of current lending standards and whether they will qualify for another loan.