A hard money lender can play a critical role in ensuring your business succeeds. However, you should avoid rushing into doing business with the first lender you come across. There is a need to know whether the lender you choose is the best one and understand your expectations. The following are the top tips to consider when choosing your hard money lender.
Understand the Industry
If you have never borrowed hard money, it is advisable to gather adequate details about this industry before taking a loan. Although the terms can vary from one lender to another, the basic guidelines are similar. A hard money lender offers loans to property investors, but the scope of financing is quite different from traditional financing. Ensure you understand the differences.
Carry Out Research
When you do adequate research, you will discover that there are lenders that provide 100% financing. This means you do not have to contribute anything. Hard money lenders want to partner with property investors. The no-contribution requirement is quite important, regardless of the lender’s reputation, service, rates, and transparency.
Deal with Direct Lender
After finding a given lender, there is a need to know where they obtain their money from. Although brokers are good, you should consider dealing with a direct lender. That is because the process is quite straightforward and easier. Moreover, you can avoid exorbitant fees charged by brokers. Also, direct lenders are not the same. You can find some that are individuals who offer loans from their offices, whereas others are firms that invest their capital.
As you know, property investment is local. That explains why you should deal with a local hard money lender. Although you might find national lenders who offer lower interest, being far from the property can make repaying the loan a bit challenging. Remember that servicing is a critical part of the lender’s responsibilities. Consider choosing a lender who is knowledgeable of the local market.
There are certain lenders who can entice you with lower rates but change their terms of the loan. Remember that you need to avoid scams in this industry. Therefore, you should first seek referrals. It does not matter how attractive their terms are, you need to gather details about the lenders by talking to their past clients. Also, you should be ready to ask relevant questions. Ensure you read reviews and testimonials from the past borrowers.