Private money loans are regarded as the very best and most straightforward way to get fast access to finance for property investment purposes, particularly when you’re contemplating flipping houses. Through private money, loan seems sweet and comfortable, as an investor you can’t afford to walk into it with your eyes shut. It’s always a good idea to ask some pertinent questions to some private money lender about their programs and practices.
While licensing cannot be thought of like a compulsion, it will surely help protect you against any creditor scams or unethical practices.
Nex, determine their financing preferences, and financing programs. How long are they in the company, and what are the standards they have set up for their underwriters to approve financing. Here you should ascertain if the lender prefers some specific market, for example, residential properties over commercial properties.
Any loan situation is incomplete without finding out the interest rates thereon. It’s even more critical in private cash loans since there’s not any standardisation in the market and lenders tend to charge widely varying interest rates! Also, ask the credit to value (LTV) which you can expect to get – whether it’s commonly 70%, some private money lenders may tend more towards a lower LTV.
And when you’re at it, ask about how soon the money will be available to you once all the formalities are completed. This is because it is easy to miss a lucrative deal because of slight delays in arranging the financing.
Some more significant questions are concerned with the charges structure, closing prices and most importantly, the prepayment penalties. You may even inquire about a quote of how much profit you can expect to make on the real estate investment bargain.
Always make it a point to discover who will be your point of contact if any issues arise during the loan proceeds or perhaps during the tenure of the loan. Aside from this, it’s wise to raise the question concerning the safety of your personal information as you must disclose plenty of personal and company details while taking the hard money loan.
Great private money lenders will openly speak with you about their loan programs and also disclose the corresponding details. Even if the lender tends to ditch the queries or meander in his answers, consider it a red flag.