3 Potential Disadvantages Of Using A Hard Money Lender in California

Should you get hard money loans for your real estate investing? In this blog post we’ll answer that question for you by sharing 3 potential disadvantages of using a hard money lender in California to help you decide whether hard money loans are right for you.

Real estate investors prefer not to tie up their own capital in a real estate deal but instead they’ll use other money sources to help them do deals. There are many money sources, and hard money lenders are one such source.

There are good hard money lenders out there and hard money loans are a common way to invest. However, every investor needs to decide for themselves if a hard money loan is right for them. To provide you with a balanced view, consider these 3 potential disadvantages of using a hard money lender in California.

3 Potential Disadvantages Of Using A Hard Money Lender in California

Disadvantage #1. Pay Back With Interest

A hard money loan is just that – a loan. And loans come with interest, which is the lender’s way of making money for the service they provide. There’s nothing wrong with them charging interest for the loan but you need to be aware that the interest exists and you need to factor it into your accounting. Are you prepared to make principal plus interest payments?

Disadvantage #2. Need More Money

Another disadvantage of hard money loans is that it’s not a bottomless pit of money. You need to figure out ahead of time how much money you need and then you need to borrow that amount of money. Problem is, what if you counted wrong and need more? Either you go back and apply for more or you look somewhere for the extra money.

Disadvantage #3. Return On Investment

When you borrow money and have to pay it back with interest, this could potentially delay or reduce your return on investment. For example, if you borrow money to fix up a rental property and then rent it out at $500 a month, any hard money loan repayment of $500 a month will prevent you from seeing any return until the loan is paid off. (These are just example numbers and of course you should structure every loan in a way that makes sense for you.)

Summary

Hard money loans are one of many investment tools. They have many advantages to help real estate investors run and grow their business by doing more deals. And just so you know – we actually like hard money loans and believe in them. However, it’s important for every investors to know all the facts up-front, and this information about 3 potential disadvantages of using a hard money lender in California will help you figure out if they’re right for you.

Need hard money for your real estate investment? We make hard money loans. Click here now and fill out the form or call our team at (951) 200-4156

iwsprop25

About iwsprop25

Mr. Val Falcon is a former US Marine, recognized with multiple awards for outstanding leadership and drive. He has traveled to various Countries around the world serving our Country and learned that the only failure is quitting. After exiting the Marine Corp with an Honorable Discharge he worked 24 years in Law Enforcement. He was then hired by a Fortune 500 Company conducting investigations in Risk Management. Mr. Falcon then began investing in real-estate and works hard to help homeowners and others solve their Real Estate challenges. He will buy properties and offer various solutions so they can move forward in these tough economic times.
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