Maximizing your return on your investments is the name of the game in the business of real estate investing. Leveraging your wealth allows you to realize the highest return on your investments or ROI. Private lenders provide what are known as hard money loans. Generally, these loans are used by those who have ventured into the house flipping arena of real estate investing. We will cover five things you should know about working with private lenders in Philadelphia.
When it comes to working with private lenders in Philadelphia, it pays to comparison shop. While the terms are somewhat negotiable, this short-term bridge loan ranges from several months to three years in length. Some of the questions you’ll need to ask the private lender are their financing requirements and the closing timeline they offer. Is it matching the time it will take to process the required information? If your credit rating or income is your biggest hurdle, you’ll want to seek a private lender that doesn’t base their approval on credit or income. While a local private lender may be more expensive, they tend to be more flexible due to their intimate knowledge of the Philadelphia real estate market. On the other hand, nationwide private lenders tend to be stricter but offer better terms. Before interviewing your list of private lenders, take a moment to determine the aspect of the loan that is most beneficial to you.
Check out their credentials before you ever make contact with private lenders in Philadelphia. You’ll want to ensure you have turned over every possible rock to make sure you aren’t walking into a financial and legal disaster. Anything that sounds too good to be true usually is, and offering guaranteed approval should be considered a warning sign in the private lending arena. Whether local or online-based, the lender’s contact information should be visible, including a physical location, and if they are online, is the website secure? Are they contacting you or trying to pressure you into a quick decision? If so, this is not professional behavior. Take the time to check reviews from legitimate consumer sites. Word of mouth is the best resource to find trusted service providers. Dig into the company, is it registered? Never pay fees in advance of service rendered.
Are you in a hurry? If so, you’ll want to focus on their funding speed. Private lenders can save you valuable time by skirting around the traditional process of qualifying for a mortgage which averages around 30 days. Most often, people who are willing to make a great deal are not in a position to wait for their buyer to attain a mortgage. The ability to move quickly in the Philadelphia real estate market means you can grab the deals that are slipping through the hands of your competition in the Philadelphia real estate market. Additionally, you’ll need to know the valuation method the lender will use so that you don’t encounter a costly surprise after moving forward with the loan. Will they use a broker’s price opinion, valuing the property in-house, or go through the lengthy and expensive process of an appraisal?
No one wants to get in over their head, so you’ll need to know about any fees, how much cash you will need on hand to close, your monthly payments, and the total cost of the loan. Making an informed decision allows you to be confident about making the payments to your private lender in Philadelphia. Know about working with private lenders in Philadelphia. What loan-to-value ratio do you need? If your issue is cash on hand, search for lenders who offer 100 percent deals. Private lenders may charge points. One percent of the total loan amount would equal a point. Typically there is a two percent origination fee in addition to the interest on the loan.
These loans are most often secured by the subject property itself, forgoing the traditional debt to income ratio requirements of a conventional mortgage. Because of this type of loan’s riskiness, the interest rates are naturally higher, and the loan-to-value ratios are lower. Keep in mind as time passes that as you gain experience and build your flipping business, expanding overall volume, private lenders will gain confidence in you, leading to improved loan terms. Many successful Philadelphia real estate investors began in just this way. However, keep in mind that a default isn’t a loss for these private lenders, as they gain ownership of the property. Successful investors also take the time to learn about hard money lenders, using them to their best advantage.
The most important thing you should know about working with private lenders in Philadelphia is that Philly Off-Market Deals will help you find the best deals! Philly Off-Market Deals makes success easy, contact Philly Off-Market Deals at (215) 422-3288!