Costly Mistakes All Hard Money Lenders Should Avoid
A successful hard money lender is always cost-conscious and understand that costs will accumulate over time. That’s why they try their best to maximize the revenues all the time. To avoid those “expensive” mistakes, here are some tips to highlight.
Investing In The Wrong Properties
A good quote to address: You make your money when you buy a property. Bad properties have something in common: narrow margins and a lot of repair work which needs to be done. Just remember that, don’t ever rush to make a deal until you find your perfect one. Have some patience and you WILL find a better which has a higher opportunity to obtain gains.
Poor Tenant Selection
Once you choose the right property to invest in, another tough yet important mission follows — tenant screening. If you overlook the importance of tenant selection, you will self undertake the aftermath of impacting your future profitability.
A bad tenant will diminish your profits in several ways, including:
- Late rents and/or missed payments
- Property damage and maintenance issues
- Violation of lease agreement terms
- High turnover
- Failing to leave the house in good condition when moving out
When you find your tenants have financial issues and lack a sense of responsibility, end up with them immediately. By improving your tenant screening process, you will minimize the chance of running into these scenarios and maximize the profitability.
Overpaying for insurance
On some occasions, landlords just can’t wait to quickly accept the deal of insurance or personal loan products to pursue efficiency. However at the same time, they end up overspending. Although a bit time-wasting, it’s easier for the hard money lenders to compare the rates and enjoy meatier profits in the future.
Select The Wrong Finishes
Be careful when you choose the finishes for your rental property. Who doesn’t expect those designs with good looks yet not requiring costly replacements after each tenant moves out? For example, carpet is cheap and easy to get ruined. Landlords need to replace those carpets with stains, rips and snags before the next tenant moves in.
Just to add a little money to your finishes, you could switch to purchase vinyl plank flooring which looks better and also provides greater durability and longevity.