Before deciding on a hard money lender, you need to take into account some things. You do not want to go into a transaction with a traditional lender without having information regarding the bank or the financial institution, and these are the same measures that you need to take into account while choosing a hard money lender. This article has outlined some of the factors that you should consider when looking for a hard money lender.
You must consider the location of the property. Hard money lenders tend to lend money on properties located near their offices. Because of this, you need to be on the lookout seeking a hard money loan. Conventional lenders will cross state or county lines; this is not always the situation when you are looking for hard money loans. These private individuals and companies prefer to invest their money back to the local community. Therefore you stand higher chances of getting a potential investor who will finance your project that is near the property.
You need to establish the reason for taking the loan. Take into account the purpose of seeking a hard money lender. Bear in mind that you will have to market your property to your investor or group of investors. Therefore, the more information you can provide them with, the better chances you have of getting the funding you require for your project.
You must put into consideration existing guarantees on the property. Hard money lenders need the first guarantee of any property they fund. Make sure you analyze if you are capable of providing clear titles to their property. If not, you will have to add the current lien to the new lol so that you make me hard money lender the first lien-holder.
Look for a hard money lender that you can create a long-lasting relationship. Although you might have good credit and established business, there are higher chances that you will still require the services of a hard money lender. The short-term loans are ideal during the times when you need money urgently, or you do not want to go through the procedures involved with conventional lenders. You can also opt for hard money loans as temporary solutions when the project is near completion and then go back to traditional funding later on. When you go to a lender that you use regularly, it will simplify and smoothen the process, and this enables you to finish everything on time.
You need to consider the loan-to-value ratio. Hard money usually loan from 60 to 65% of the property values. As a result, you will want to consider the amount of money you will need to loan compared to the value of the property. In case you own a property, and you do not intend to expand, you must evaluate how much the cost will be after the completion of the project because you might interest a lender in loading you that money depending on the value of the expansion.