Potential real estate investors in the Las Vegas area looking for reputable hard money lenders may find the task a bit daunting. Just like with any other business investment, there are risks of falling into the hands of unscrupulous dealers and you’ll need to be wary of them.
Here are some tips to help you separate the good from the bad and locate the best fit for your investment goals.
1. Finding The Most Reliable Hard Money Lenders
First things first, be calm. People can sense desperation and only the more sincere ones will overcome the urge to take advantage. Being in a hurry will also lead to many mistakes in your dealings with Las Vegas lenders. Mistakes like accepting loan conditions full of penalties and restrictions or a loan advance rate that’s far below the value of your collateral. If you can take the time to do some online research or just ask for referrals from people you trust, you’re sure to find some honest hard money lending businesses in Las Vegas.
2. Understand Your Loan Terms
After finding a good lender, your next concern would be understanding the conditions for the proposed loan. This is a common pitfall for impatient would-be investors.
Check what you’re about to sign. Do you understand the terminologies or is there something you’re not comfortable with? Discuss with the lender first and don’t be afraid to delay the process or even back out if you are not convinced of their sincerity.
Make sure you are clear on the duration of the loan, how much you’ll be paying and at what intervals such payments will be due. Some loans can be structured to fail from inception especially adjustable rate or interest only loans. The final payment at the end of the loan term may be unbelievably large and impossible for you to pay off. You’ll need to know how to spot these tricky clauses or work around them. Certainly, avoid loans that are open to change as they’re designed to favor the lender. You just can’t win with those.
3. Recourse vs Non-Recourse Loan
During your search, you will frequently come across the terms “recourse” and “non-recourse” loans. These terms refer to the two categories of Nevada hard money loans you can access.
The recourse loan permits the lender to legally pursue you and even repossess personal assets like your home and still take further legal action against you if your collateral does not cover the loan amount in the event of payment default.
A non-recourse loan offers you more protection. The lender may still repossess your house if they can prove negligence, fraud or willful waste etc. on your part but they can’t take legal action against you.
Clearly, the non-recourse loan is the more favorable of the two so do check what the lender is offering you before signing the papers.
Don’t put yourself in a position where you’ll face additional risks or get conned into paying more than you actually owe.
4. The Lower The Points, The Better for You!
Another common term clients of hard money lenders In Las Vegas frequently hear is the word “points.”
Each point on a loan is equivalent to 1% of the total mortgage amount. So for a $500,000 loan, each point is worth $5,000. The loan you’ll be offered will usually carry between four and eight points. The lower the points, the lower the amount you’ll repay in the long run. Try to negotiate the loan to below five points so you can easily keep up with the scheduled payment and other costs.
Rarely will you find a Las Vegas hard money lender offering a one point on a loan.