There might come a point in your investing career that you will need to use commercial hard cash banks. Hard money is used when you need to get quick short-term financing. The rates are customarily high and the LTV's extraordinarily low (to account for the risk involved in these types of loans). These loans are often tied right to the property price (however , lenders also glance at the borrower's credit report, private monetary statement, etcâ€"they use this information on decide your rates and allowable LTV). Some people are frightened to even think about getting a hard cash loan because the rates are so highâ€" but that shouldn't stop you if the numbers sound right.
The commercial hard cash industry is chock-full of credible lenders as well as sharks. And it would surprise you to discover who the sharks are! They're the ones with all of the slick advertising that guarantee you everything but never deliver (but they do manage to keep a nice piece of your cash).
I have heard lots of horror stories, from not closing on time to losing hundreds of thousands of greenbacks.
So how do you avoid being a casualty on this battlefield of commercial license moneylender ? Read on and I'll share with you tips from past clients as well as my personal personal experience.
- PROBLEM 1 - Not Employing a Commercial Mortgage Broker
So you believe you will save yourself some money by not employing a commercial mortgage broker, but trust me, you may spend more long-term. The broker is the expert you want to rely on. Not only will they know any better investment sources but they will also know which to avoid. Brokers also have a fiduciary responsibility to act in your best interest, so they should understand the process and know the bank. Generally brokers will charge you 2 points to broker the loan.
- Problem 2 - Not Having a Counsel Review Your Documents
A Broker has a fiduciary responsibility to act in your own interest but they're not an attorney. Before signing any contracts and pay any cash to the lender, have your attorney review the documents. Most counsels will examine contracts for a tiny fee (depending on how large the contract is) and it will be worth your investment. You not only need your lawyer to study the documents, but also have them explain them to you in "plain english".
- PROBLEM 3 - Paying Lots Of Cash Up Front
You should expect to pay some initial up front money (for appraisals or other inspections), but it should not be a preposterous amount. Also , you've got to know if the money is refundable or not and under which conditions. Do you have got to pay for site visits (aside from appraisal)? Is any part of that reimbursed if the loan does not close? This is usually where the majority of the heartache comes from...you have given them an enormous sum of money and it turns out that it isn't refundable!
- PITFALL 4 - Not Performing a Background Probe On the Lender
Once you know who the commercial hard funds provider is (if you're using a broker, they will not make it plain that till you have confirmed a fee agreement) check the state that they are approved in for any complaints or suits. The majority do this step after they have lost their cash and they're cooking up a lawsuit! I recommend that you do it before any money changes hands.
Using commercial hard money could be a beneficial response to your investment methodology, but you would like to ensure that you know what you are getting yourself into, so you don't get burned.
The commercial hard cash industry is chock-full of credible lenders as well as sharks. And it would surprise you to discover who the sharks are! They're the ones with all of the slick advertising that guarantee you everything but never deliver (but they do manage to keep a nice piece of your cash).
I have heard lots of horror stories, from not closing on time to losing hundreds of thousands of greenbacks.
So how do you avoid being a casualty on this battlefield of commercial license moneylender ? Read on and I'll share with you tips from past clients as well as my personal personal experience.
- PROBLEM 1 - Not Employing a Commercial Mortgage Broker
So you believe you will save yourself some money by not employing a commercial mortgage broker, but trust me, you may spend more long-term. The broker is the expert you want to rely on. Not only will they know any better investment sources but they will also know which to avoid. Brokers also have a fiduciary responsibility to act in your best interest, so they should understand the process and know the bank. Generally brokers will charge you 2 points to broker the loan.
- Problem 2 - Not Having a Counsel Review Your Documents
A Broker has a fiduciary responsibility to act in your own interest but they're not an attorney. Before signing any contracts and pay any cash to the lender, have your attorney review the documents. Most counsels will examine contracts for a tiny fee (depending on how large the contract is) and it will be worth your investment. You not only need your lawyer to study the documents, but also have them explain them to you in "plain english".
- PROBLEM 3 - Paying Lots Of Cash Up Front
You should expect to pay some initial up front money (for appraisals or other inspections), but it should not be a preposterous amount. Also , you've got to know if the money is refundable or not and under which conditions. Do you have got to pay for site visits (aside from appraisal)? Is any part of that reimbursed if the loan does not close? This is usually where the majority of the heartache comes from...you have given them an enormous sum of money and it turns out that it isn't refundable!
- PITFALL 4 - Not Performing a Background Probe On the Lender
Once you know who the commercial hard funds provider is (if you're using a broker, they will not make it plain that till you have confirmed a fee agreement) check the state that they are approved in for any complaints or suits. The majority do this step after they have lost their cash and they're cooking up a lawsuit! I recommend that you do it before any money changes hands.
Using commercial hard money could be a beneficial response to your investment methodology, but you would like to ensure that you know what you are getting yourself into, so you don't get burned.
About the Author:
D. Dhar is a business writer focusing on personalloan and credit products and has written reputable articles on the finance industry. She has done her pros in Business Administration and is presently aiding as a singapore loans expert.
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