Many people talk about the risks involved with hard money lending, and you may be asking yourself, “Is it worth the risk?” The truth is, as long as you know how to avoid the common mistakes, you can reap the huge rewards that come with investing in a property. Below are a few factors that, if not carried out correctly, can lead to problems with the deal.

Do Your Research: Whether you’re choosing your lender, a construction company, or just simply deciding whether or not you want to pursue a deal, make sure you know what you’re getting into. Find professionals that have done this kind of work before and can give you good, accurate quotes for prices and timing. Always do your research when deciding on a lender. Make sure your lender is experienced, well-capitalized, works in a timely fashion, and has a good reputation. Getting involved with an inexperienced lender may delay the deals because you might not get the money on time, putting you up to risk for extra days of interest. Be sure to ask your lender about their process for draw requests and releases so there are no surprises after you close the loan.

Manage Your Timeline: One of the most important things to realize when it comes to hard money lending is that time kills deals. You should always be realistic when it comes to determining the time it will take to see a deal through – from closing the loan to selling the property.

Avoid Radio Silence: One of the biggest mistakes a borrower can make is going radio silent with his lender. Not only does this cause issues with the deal, but your lender is there to help you with any issues that should arise throughout the process. We’ve been through this hundreds of times, and chances are we’ve found a way to solve whatever issue you are experiencing.

Check back with us next week for additional tips on avoiding risks in hard money lending.