TMCnet Feature
January 06, 2021

Expert Advice when Choosing Hard Money Lenders



Hard money lenders have preferred investors seeking credit via collateral as many soft loan lenders can only give minimum credit for a relatively smaller asset. Soft loan lending has a share of its shortcomings as it can only be used to fund small to medium business ventures, unlike hard money lending, where huge credits offered can be used to set up vast real estate companies and other long-term projects.



Soft money lenders focus on the applicant’s credit score, while hard money lenders are interested in assets as security. Crucially, not all hard money lenders in Texas operate on similar lending models. This indicates that applicants have to carry out thorough research to identify what lender fully meets their needs.

Hard money lending offers real estate investors some outstanding benefits but may work way differently from conventional financing models commonly used today.

Run a Credibility Check-up

Let’s be honest. If a lender is as reputable as they may tend to claim, they must have the competitive profile that backs it. Their catalog should consist of massive projects they’ve engaged in and profoundly funded. They may have initiated a public-private partnership before, worked with NGOs, CBOs, FBOs, and humanitarian organizations.

They must also produce licenses from their respective state department of housing, real estate, and urban development. Check to see if there are outstanding complaints raised against their license. Demand a copy for the same. It should be a red flag if they get adamant about producing.

Only Consider Firms Specializing in Hard Money Lending

Even before venturing into finding out genuine lenders, it’s always fulfilling to identify who a hard lender is not! Hard money lenders must not be mistaken for private investment lenders. Established hard loan lenders ensure clients can access lending support from application, processing, and maturity to financing and repayment.

 They facilitate a more painless application process and give their clients peace of mind. They even provide professional advice to clients and guide them on making maximum returns on their investments. Dig up lenders' review and referral information to identify what to expect.

No matter their verbosity, hard money lenders may harbor more than meets the eye and the best way to separate the chaff from beans is to find out the satisfactory indices of their previous clients. Lenders who’ve been in the real estate industry for a long must have established vast networks of investors. Identify repeat customers because they’re a good indication of satisfaction.

Consider Local Investment Lender

All lenders are incredibly upbeat about evaluating any collateral's worth because its equity is the only protective measure they have against default. Many will be willing to go the extra mile and carry out exhaust analysis to determine the modern value of property used as collateral. Some hard loan lending institutions have standby third-party property valuers and assessors who facilitate this process on behalf of the institutions.

It is always wise for credit applicants to consider the nearest property as collateral to minimize the turnaround time for lending through managing evaluation time.

Always Stay on the Driving Wheel while Negotiating

To ensure the lending process is completely transparent, it’s always the applicant’s responsibility to take charge and avoid being led on into signing documents in a hurry, just because they need money urgently. Take time as unscrupulous lenders may compel applicants to sign teaser rates and hidden charges, which may come to haunt applicants later on, during repayment.

Make calculated comparison analysis as many lenders may operate on related rates, which may not be typically similar. Search lending rates from lenders nearby working in the same economic zone because they may share the same traits. Beware of extrapolated lending models because they may pose divisive theft schemes.

Identify Your Needs

You cannot afford the risk of just borrowing money without a clear definition of need. If you are interested in borrowing money to renovate a residential or commercial property, flip it, and sell it at a much higher value, indicate it as the need. There are lenders out there who may even incentivize your business by providing lending add-ons that can transform your ventures.

Some lenders may share interests with investors who may inspire them (lenders) with their business ideals worth taking up regardless of the money and resources they (investors) may have. Again professional lenders have specific spectra in lending to focus on the one-dimensional property type than a concoction of investments. Recognizing your needs helps you identify the best and cheapest lender as well.

Identify Brokers from Lenders

Lending brokerage exists. As an investor, you may have to sell your needs to a broker who can take the borrowing liability off your shoulders, though at a cost, and find the best lender for your investment. However, this may deny you the liberty of accessing personalized loan service hands-on and expose you to third-party risks that can be too costly when done fraudulently. This is a decision that can best be made when investors fully recognize their needs.

It’s vital to recall that while researching potential lenders, it’s advisable to find out their capital sources and identify their lending heritage. As an investor, choose a lender with the most underwriting flexibility. These are virtually lenders who lend their own capital.

Time Lag for Funding

In most instances, lenders furnish investors with the exact timing between application and maturity of loans. Hard money lenders process loans relatively faster than traditional bank methods, and in a fortnight or less, investors can be sure to have money. Some lenders can accomplish the entire process in paltry five days.

Identify Red Flags and Grey Areas in Lending

We are all drowning in a sea of information but gasping for truth. There are so many unscrupulous players in the investment industry, and it is only wise to know their attributes. Meager rates, asking for money upfront, little to no borrower contribution, and dinky office locations to no location at all are the tell-tale signs of a deal too good to be true.

Honest lenders have a conspicuous online presence in social, print, and mainstream media. Some may run advertisements from time to time to create awareness for their products. Lenders who may hide their presence are raising a red flag.

Research Lender’s Risk Assessment

Successful lenders have re-insured their institutions to avoid bad debts and risks posed by hazards. As a result, sound underwriting is at the epicenter of all lending businesses as investors may want to protect against uncertainties that could arise in the real estate business.

Investors must always be proactive while seeking lending services. They have to find the right information before they approach the lenders. Dishonest lenders may use uninformed investors to make a kill with their ideas or their cash. If it is an investor’s first time to make an investment venture, ensure to tag (News - Alert) along with someone who has experience from lenders before. They can even look for referrals from their online social and professional platforms like Pinterest, Linked In, Twitter, Facebook (News - Alert), Instagram, Snapchat, and Indeed.

Most lending institutions have developed apps that are easily downloaded from the play store. Here, they can access important information regarding reviews. It is a huge relief to be able to interact with professional lenders right at the user interface. Excellent lenders have built a relationship with a broad range of investors from fashion, education, mining, and production to the retail and energy industry. I help this will help potential investors make an informed decision before rushing to any lender.



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