How Hard Money Lenders Help with Property Valuation

What’s a property valuation? Is it easy to know if a deal if great or bad? There are several parameters that help hard money lenders to know if a deal is worth investing in, and you can get a hard money loan if you have a great deal at hand. In this post, we'll discuss these aspects in details.

You shouldn’t get excited and buy a property before you can take a deal evaluation sheet or calculator to know its true value. Deal evaluation is looking at the transactions to know if the property is good or bad. A good deal should offer enough value or a good profit margin.

The goal of hard money lenders is to ensure that people purchase properties that are good enough to make money. Commercial hard money lenders will evaluate all the deals that clients present to confirm if they are getting enough money or not. Many hard money borrowers are real time investors who want to buy good properties and still manage to make profits.

From the perspective of hard money lenders, we have outlined some important elements you should understand before getting a property under contract:

• Rehab sales price – getting to know the amount the property is likely to sell for.
• Repairs – this is the evaluation of repairs. What are the repairs one needs to put into that property and the amount of money that will be spent?
• Holing/buying cost – this is the amount you will pay to access the loan, including the payable interest over the loan’s term. It’s crucial to be informed about these time periods since contracts can fall in and out.
• Selling cost – this cost will include your marking costs, title fees, and real estate agent fees. It’s the amount it costs to sell a property.
• Market reduction – It involves understanding how the market depreciates annually.
• Profit – this is the main aim of doing such deals, i.e. to make as much profit as possible.

Hard money lenders work with people who are great at evaluating deals since they want to invest in the deal as well. When evaluating transactions, the experts consider the lowest “solds” and “actives” in a particular area with the same sq. footage. It doesn’t matter if it is a short sale or owned by the bank, provided it’s in an average condition.

In case the property is in a terrible condition, it can be excluded, but in case it is in a livable condition, and it’s similar in size, you can use it as a comparison. This way, you will know the amount the property will sell for.