When all your investments are blocked in a real estate project that you cannot complete, you tend to get desperate and look for the easiest solution, namely a loan from the hard money lenders New Jersey is home to.
However, rushing things is not such a good idea, as there are many mistakes you could make, some of which could cost you your property and all of your investments with it. Here are three mistakes you should never make, no matter how desperate you are:
Turning To The First Hard Money Lenders You Come Across
You should always do your research. There are lenders out there who are only after your property, and, in order to get it, apply hidden fees and penalties for early repayment or would never agree to postpone your repayment period. The best way to avoid dealing with them is to do your homework: compare loan terms and choose the hard money lenders New Jersey real estate investors describe as the most reliable.
Not Knowing Exactly How Much Money To Borrow
You might be so desperate to get the money you need and continue with your project as to just go about and see how much money you can get. That is not a good idea. You might borrow less than you need, not have enough equity left in the property and end up in the same situation – unable to complete your project.
If you borrow more than you need, you will pay more money as interest, and hard money loans can get pretty expensive. Before talking to any hard money lenders New Jersey is home to, ask your contractor to provide a clear cost estimation for the works remaining to be completed, and don’t forget to include another 5-10% for unforeseen expenses. This way, you will know exactly how much money to borrow
Committing To Repay The Loan Too Soon
Hard money loans are granted only for short periods of time, sometimes as short as 30 days. Your interest is, indeed, to keep the money for as little as possible, in order to pay less. However, construction projects often get delayed, and there is no guarantee that you will be able to sell the property as soon as you put in on the market.
It may be a wise approach to add one more month to your estimated repayment date, just to be sure, or, at least, to make sure that, in case you need an extension, you can obtain it.
Avoid making any of these mistakes, because, as mentioned above, you risk losing your property to the hard money lenders in New Jersey you work with.