Borrowing in an Uncertain Market Heed these lessons before you commit to a loan from a private or hard money lender.
by Bill Fairman, Wendy Sweet, and Jonathan Davis
W ith the economy uncertain— and some economists predicting a recession—it’s wise to consider your borrowing options to ensure you make an informed decision. Each person’s situation is unique. If hard money or private money is an option you’re considering, here are some questions to ask yourself: 1. Is borrowing necessary? Is
4. Do you really understand the risks? Assess the risks that accompany borrowing (e.g., declining property values, increased loan defaults, potential challenges in selling or refinancing the property). Always consider the worst-case scenario and how it can affect you and your exit strategy. 5. Can you afford the risk? Can you sleep at night? Private money and hard money loans
repay the loan, consider your income and existing debts, and anticipate your future financial circumstances. Remember to always consider the worst-case scenarios, especially a further economic downturn or possibly a job loss.
3. What are the terms and conditions of the loan?
seller-financing a possibility? Should you sell assets or seek other sources of financing? Looking for alternatives should be first on your list.
Understand the interest rates, fees, and terms associated with the loan. Calculate the total cost of borrowing and how it aligns with your financial goals and return on investment.
often come with higher interest rates and more
stringent terms compared to traditional loans. Assess your risk to determine whether
2. Can you really afford the
loan? Evaluate your ability to
42 :: INVESTOR REVIEW :: JUL-AUG 2023
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