Find a Reputable Lender
If you’re actively involved in real estate-or hoping to be-you’ll want to make sure there are some reputable hard money lenders already in your network, so you don’t have to scramble to find a good one whenever you have a deal on the proverbial ice.
There are a few barometers you can use to gauge how trustworthy a lender is. Do they have a professional-looking website, or is it simply a landing page for gathering your personal information to pass on to a third party? What do other investors say about this lender? Are there any outstanding lawsuits against them? Do they have a portfolio of past projects? Can you meet them or a designated agent in person? Many genuine hard money lenders will want to see (or send someone to see) the property you’re offering as collateral.
Some lenders might only focus on specific types of projects. For example, if they finance hospitality ventures like hotels, they may be reluctant to finance other types of commercial real estate or residential real estate. Knowing which lender is best suited to your particular project will help everything move faster and more easily.
One way to set yourself up for success in finding great lenders is to build up a network of reliable professionals through a real estate investors association. Such an organization is dedicated to connecting real estate professionals of all levels to one another, which can certainly set you up to find a www.paydayloanstennessee.com/cities/lawrenceburg/ reputable lender when in need of a hard money loan.
Show Investment Potential
Once you’ve done your homework, you’ve got to show this lender that the property in question has potential. After all, they are more interested in the value of the property than your own financial position.
Despite the fact that the loan is founded on the value of the collateral, it helps to show some experience in real estate and that you know what you’re doing. The lender will also want to see pertinent documents like architectural plans, construction budgets, and contractor bid sheets. You will need to prove the value of the property, the surrounding neighborhood, and its potential for growth-which you can do using publicly accessible information from a multiple listing service (MLS) like Trulia or Zillow.
Apply for a Loan
While traditional loans can take months to process, a hard money loan can be approved in a much shorter amount of time-say two weeks. You will want to make sure all your documents are lined up and taken care of, not just for the loan, but for the property in question as well. Contractors and designers should also be informed of the time frame so you can put them to work as soon as the loan is approved.
Keep in mind that the lender may still want to see some personal or business financial information, such as tax returns, bank statements, or earnings reports. You should have this documentation ready to go. It’s also important to stay in touch with the lender during the application process and beyond-return their calls and emails promptly. Hard money lenders are not banks, and keep much less capital on hand. If they feel you’re not interested in your own project, they may move on to working with a different borrower.
Real estate investing for beginners is fraught with challenges that fall along the learning curve, but one that’s very easy to overcome is eliminating your personal vulnerability. You should never conduct business under your own name, and always under a business name. Determining the exact structure of your business (for example, LLC or S-corp) will depend on your circumstances, but you definitely want to separate your personal assets from your real estate enterprise and eliminate the possibility of the lender coming after you, your home, or your personal tangible goods.