logo
logo
AI Products 

Avoiding Pitfalls of California Hard Money Loans

avatar
hervey allen
Avoiding Pitfalls of California Hard Money Loans

California hard money loans are a way to finance a property if you have the assets that can serve as collateral. These days, it's not at all always easy to find the perfect financing for a property. Therefore, you need to get creative and use alternative methods of financing. One such method is hard money loans. 

What is Hard Money Loan?

A hard money loan means an asset-based loan in which a borrower receives cash secured by real estate. Private investors or businesses are the most common lenders of hard money loans.

Essential aspects to consider before applying for Hard Money Loans

There are benefits of using California hard money loans. Still, there are also pitfalls that you can avoid if you have information about what they are ahead of time and plan accordingly. 

 You need collateral- This one may seem obvious, but it is important enough that you want it out there first off: For an investor to lend their funds in exchange for your asset (or properties), you need to provide collateral. It means that if you default on your loan, the investor can repossess an asset (usually a property) until you repay them. It is why it's so important to choose the right investors and make sure they have a good reputation!

Rule of Thumb when dealing with Hard Money Loans if you have an eviction on the background check run by the hard money lender and allow them in their portfolio. It is usually a sign that if you default on the loan that they will evict the tenant.

An excellent tip to avoid eviction when using hard money loans is to ensure your tenants are always on time with their rent! It gives you a solid credit rating and makes it easier for lenders like us to work with you. It's also best practice not to borrow more than 50% of the ARV of the property you are buying. Hard money lenders don't want to lose their shirt if there is a default, so it may be challenging to lend out funds on properties with an ARV of over 50%.


Conclusion: 

There are different ways to finance a property, though, so it's essential to do your research! 

 It is why it's critical to find an investor that you trust and will be able to work in this situation. If you are unwilling to provide collateral, California hard money loans may not necessarily be the best option. 

collect
0
avatar
hervey allen
guide
Zupyak is the world’s largest content marketing community, with over 400 000 members and 3 million articles. Explore and get your content discovered.
Read more