. How to Identify and Avoid Hard Money and Private Lending Scams | Arkad Capital | Blog Post

How to Identify and Avoid Hard Money and Private Lending Scams

Hard money lending often has a bad reputation, but when you find the right lender, it can be more than legitimate, it can be what helps you buy the perfect investment property. As with any financial transaction, it’s important to do your due diligence to make sure you’re dealing with a legitimate lender.

Avoiding real estate scams isn’t as hard as it seems with these simple steps.

Do your Research

Just like you wouldn’t invest your money in a random investment someone told you about without doing your own research, do the same with investment properties. Before you secure lending from anyone that claims to be a hard money or private lender, do your research.

Check them out on the Better Business Bureau, their social media pages, and within your real estate networks. If the lender isn’t known by anyone, consider it a red flag and look elsewhere. If they are legitimate, there should be some trace of them somewhere.

Look up the Lender Online

A reputable hard money lender will have a website and be transparent about what they offer the process, and costs. They may not disclose all costs or exact rates online, but it should be easy enough to get a decent amount of information just by viewing their website.

If you look around online and can’t find anything about a private lender, chances are they are a scam and you shouldn’t use them.

Use Social Media to your Advantage

Today, it’s easier than ever to check up on a company’s reputation as everyone talks about their business online. Get in with real estate investor groups on Facebook or LinkedIn and read the chatter about different lenders.

Finding the right lender sometimes means you just need to hop online and see what others are saying. You’ll find both good and bad reviews for lenders online and that’s good. You need to know the truth about what lenders offer. Don’t be shy to look around on social media.

Read Reviews

Check out a lender’s reviews on popular real estate investor websites like Bigger Pockets or Active Rain. You’ll find candid reviews and recounts of investors’ experiences on these websites. Like any online reviews, read it carefully – some people go out of their way to say mean things even when they aren’t true, but you can typically tell the ‘good’ reviews from the ‘bad.’

Look for ‘Too Good to be True’ Deals

We’ve all seen them – you get an offer and think ‘how is that possible?’ It’s not, and that’s why you should steer clear.

Some lenders do what’s called ‘bait and switch.’ They get you excited about a loan and promise you the world until it comes time to fund it, then they switch the terms and costs on you but at the last minute when you’re less likely to bail from the situation because you’re already invested in the home financially and emotionally.

They Claim no Property Appraisal is Required

Hard money loans are 100% based on the property’s value. If a hard money lender claims you can get away with no appraisal – there is a good chance that it could be a scam. The property appraisal is what tells a lender if there’s enough collateral to write the loan.

A legitimate lender will need an official appraisal before making any lending decisions, anyone who says they don’t need one isn’t a real lender.

Requesting Large Fees Upfront

All lenders have fees, but they don’t ask for the fees upfront. The fees are collected at the closing, with the exception of small fees – but nothing that would make you worry about losing it. Any lender that asks for a large deposit upfront will not be around after you pay them.

Finding the Right Lender Takes Work

Yes, finding the right lender takes work, but it’s worth it because it protects your pocketbook. Falling for a scam can leave you with a large financial loss and the inability to invest in your real estate investment.

Put in the due diligence and find the lender that offers a legitimate loan for you to start real estate investing.

If you’re in the market for a reputable hard money lender that cares about your needs and won’t take advantage of you, contact Arkad Capital today. We have great programs, excellent customer service, and anyone who has used us before can vouch for our legitimacy.

Why Arkad Capital?

Our past clients speak for themselves. They all rave about Arkad Capital’s professionalism, experience, and ability to close deals fast! Beginners and expert investors all love how Arkad Capital treats their customers not just like a number, but rather a person with questions, needs, and a bit of advice to get through an investment, whether it’s their first or fifth investment property.

⭐️⭐️⭐️⭐️⭐️ “Arkad Cap assisted in my first buy & hold refinance. I had been around numerous refinances with other investors and saw some long, drawn-out refinances with endless paperwork, verification, calls & texts. Arkad’s process was smooth, simple, clear and effective. Believe I had my refi application in, approved and closed within 30 days and minimal headaches. Mario & co are part of my team now and I look forward to doing more business with them in the future. Thanks all” – Tom Ciccarone | Arkd Borrower

📝 Read more reviews from REAL borrowers

Arkad Capital is the newest and most aggressive private/hard money lending entity in New Jersey, lending nationwide! We have taken a “we do it too” approach to the renovations, additions, and new construction funding business. We are here to help you with all your investment capital needs. Contact us today!


About Arkad Capital:

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