Being able to gain access to large amounts of money quickly is essential in the real estate market. There are often numerous buyers trying to get the same property if it is priced well. With more than 600,000 houses selling in May of 2019 alone, the market is very competitive and can be quite lucrative. This means you need to be able to get the money to buy properties quickly and this is where a hard money lender can come into play.
Traditional bank loans can take weeks or even months for approval and have stipulations that can be difficult to meet. Many real estate investors turn to a hard money lender as a way to get the money they need quickly. Hard money loans are sometimes easier to get than traditional bank loans because they don’t have as many stipulations. You don’t need a high credit score, a large down payment and can often get the money in a very short period of time.
When it’s time to get a hard money loan, you need to be sure you use the right hard money lender. With so many lenders on the market, it can be difficult to know which one to use though. The following guide walks you through a few tips you can use to ensure you work with the best hard money lender possible.
Word of Mouth Can Be Your Best Friend
The first thing you need to realize is that other real estate investors in the area can be an asset to you. You don’t want to look at them as strictly competition because there is a good chance that they can provide you with valuable information. Talk to other investors about the hard money lenders they have used. Find out why they recommend them and which lenders they suggest you avoid. Talking to a few different investors allows you to compare the information to ensure that people are giving you valuable advice.
Do Your Own Research About the Hard Money Lender
While it can seem like you need to rush to get a loan when a house comes on the market, doing research ahead of time can be really helpful. If you know that you want to invest in properties in the near future, do research on the hard money lenders that other investors suggested before you actually need to buy a property.
Look for information about the company with the Better Business Bureau. Unsatisfied borrowers can file complaints with the bureau that you can read. According to the Better Business Bureau, trusted lenders never ask you to pay fees upfront for a loan. “A real lender will post those fees prominently and collect them from the money they are lending you, but a scam lender may try to collect them as a condition for you getting money. ” If you see that the lender has numerous complaints against them, they may not be the right hard money lender for you.
Find Lenders Who Charge Reasonable Fees
There are fees associated with any loan, you get. This is the way that the hard money lender is able to make a profit off of the loan to make it worth their while in the end. It’s important to know that there is no flat fee that all lenders charge for their loan. You need to compare the fees of a few lenders before choosing which one you will use for your lending needs. This allows you to be sure that you don’t overpay for the loan when things are said and done.
Ensure Commercial Hard Money Lenders are Licensed
A real estate broker license is required in order for lenders to be able to legally lend money to real estate investors. Ask for the license ID number for any hard money lender you think you may want to work with and run the numbers through the real estate bureau within your state. You want to be sure that they really are licensed and that they have been in business for an extended period of time.
Meeting with hard money lenders can be a bit intimidating at first. Ensure that you work with a lender who makes you feel comfortable, not pressured to sign paperwork for a loan right away. Reputable lenders will want you to take time to consider your options to ensure you make an informed decision regarding their hard money loans. Be sure that you read the details of any agreement closely so that you understand when payments are due, what the interest rates are and how long you have to pay back the loan. Hard money loans typically need to be paid back in a short period of time in comparison to traditional loans so make sure you understand the logistics of the agreement is essential.