When you first start working on getting hard money loans, you will quickly learn that you have to do a great deal of research on your properties. Everyone has heard horror stories of properties that look alright but have major, expensive issues. An important part of your due diligence process will be insisting on a thorough property inspection before signing a contract.
The opposite problem is when you see a property that’s been on the market for a long time and had significant price drops. The first question is Why? Even if it’s in your price range in a good neighborhood, you have to figure out what’s going on with the property. It might be something simple, like the property being priced way too high to begin with. Or it might be that there’s something going on in the area. Maybe taxes went up suddenly. Or there could have been a spate of robberies. Get to the bottom of the mystery before making an offer.
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A related issue can be when neighborhoods begin to change. You might have found a great neighborhood you’d love to get into. You’ve done a ton of research and found a great hard money lender. When you see a property in your price range, you want to snap it up right away. If you were looking at the neighborhood a few months ago, you need to look again before committing to the property. Are there any recent changes? Businesses closing, graffiti, or other changes might signal a downturn in the neighborhood.
Finally, as we said at the top of the post, you need to be able to get plenty of information about a property before buying it. Hard money loans allow you to take on more risk than conventional loans, but you have to be smart about that risk. Some sellers are just a bit flaky about returning calls or emails. However, some will try to hide big problems. Make sure you get the information you need. If the seller won’t work with you, walk away. There are other motivated sellers out there who won’t give you the runaround.
When you’re ready for your next hard money loan, give us a call at LendingXpress.