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By Noah Brocious – President/RI/Mortgage Loan Originator – There are many real estate investment opportunities in Arizona, but you need access to working capital to take advantage of them. Fortunately, hard money loans are an excellent source for investors, whether you’re a veteran or just starting.

However, there are many competing lenders out there. How can you tell which one is right for you?

The key is to do your research. While you may be tempted to go with the first lender you come across, you can benefit from diving deep into an enterprise’s history, reviews, and fine print. Here are all the factors you should investigate before applying for financing.

What Type of Financing You Need

First and foremost, you should look for hard money lenders that offer the type of financing you need. When seeking property investment financing, there are many options:

  • Trustee loans
  • Lot and land loans
  • Additions and significant remodel loans
  • Construction loans
  • Bridge loans
  • Buy and hold loans
  • Fix and flip loans

To find the right loan, you must first identify your own needs. For example, are you building or purchasing? If you’re purchasing, will the property require extensive renovations? Once the renovations are complete, are you looking to sell right away, or do you intend to use it as a rental property until the market is favorable? Once you’ve answered these questions, you can confidently decide on a financing option and seek a hard money lender.

What the Lender Has To Offer

Of course, it’s not enough to choose a lender just because it happens to offer the financial product you’re looking for. It should also offer competitive terms that make a partnership a good business decision.

Additionally, you need to know that it’s reliable and offers excellent customer service. Since most loans last at least a few years, you’ll be dealing with this enterprise for the long-term, and you don’t want to have a frustrating experience every time you contact it.

There’s also something to be said about lenders’ history and location. Is this an organization that has roots in the community and is invested in local success? Does it specialize in the type of loan you’re interested in or is its focus elsewhere? The answers to these questions can significantly impact the quality of service you receive.

Reliability

The most important thing to look for in a hard money lender is reliability. Are your communications answered in a timely manner? Does it keep the promises made by representatives? Answering these questions is essential to finding the right financial partner.

It’s important to note that lenders’ behavior during the initial query doesn’t always reflect their actual ethics. After all, they’re trying to get you to sign on. The better measure of service experience is customer reviews.

Look for lenders that proudly display client feedback. Read both good and bad reviews and if the company has social media, see what the comments say. If someone recounts a lousy experience, note whether the lender took steps to resolve the issue. Mistakes are bound to happen, but a company’s willingness to fix those mistakes is a significant indicator of its dedication to clients.

Specialization

Does the lender specialize in hard money loans? Some traditional banks may dabble in this type of lending but keep their primary focus on financial products not geared toward real estate investment. This may mean fewer resources allocated to the team handling your loan.

Lenders that specialize in hard money financing, on the other hand, are more likely to keep up with the real estate market and understand your unique needs. They’re dedicated to providing for their clients because they want to stay competitive.

Local Focus

If you’re looking at property in Colorado, you should find a Colorado-based hard money lender. Local lenders can offer more flexibility than distant corporations and have a higher stake in the community. Serving a niche market, reputation is everything, which means local lenders are more likely to go above and beyond.

Speaking of the real estate community, it’s a good idea to check in with agents, brokers, and other investors to gauge a lender’s reliability. These individuals will have experience with the hard money lending process and, therefore, can offer sound advice on whether a financing company is a good option.

Default Rates

Another important indicator of whether a hard money lender is a good fit is the company’s default rate. This number indicates how many clients have defaulted on their loans compared to how many lender loans have been provided.

Why is this important? Traditional loans from banks and credit unions have several safeguards to ensure those enterprises don’t provide financing to individuals who can’t pay them back. Hard money lenders don’t have the same restrictions, which can be a good thing in some circumstances, but also means there’s a risk of predatory lending. A high default rate is a red flag that the lender isn’t taking the necessary steps to ensure its clients qualify for funding.

Speed

Finally, you want a hard money lender that can offer fast application processing. When you’re in the investment game, you must be able to jump on an offer immediately, or you’re at risk of losing it.

The best lenders can balance thoroughness with speed in their underwriting, allowing you to obtain cash in as little as 24 hours. This quick approval puts you at an advantage when it comes to negotiations, as the offer of cash is tempting to many homeowners.

Capital Fund 1 is Here for You

Are you interested in hard money loans and flipping homes? Then Capital Fund 1 is the lender for you. We offer financing in Colorado, Oregon, Arizona, and West Texas and are dedicated to providing the highest quality care to our clients. To start your application, contact us online or give us a call at (480) 889-6100.

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