It is always essential to do the due diligence process in investing right on any property used for a loan. We follow rigid guidelines to ensure that the property is suitable and qualifies as an affordable loan for the private lenders Gap Investments work with. Many people think they can ask their lawyer to do the due diligence on the loan. This is often a mistake. Why? Because it is not worthwhile for a lawyer to make a recommendation, as he could be liable if the borrower does not pay. Considering the legal fees, a lawyer might not want to be exposed to liability in the event of foreclosure. Lawyers often say to us: “We are not real estate experts in that area.” Following that train of thought, they may not assess the actual property value and are likely to reject the loan (even if it is a good one) rather than do all the research and take all that responsibility in that area. Additional fees are likely, as many lawyers demand far too much unnecessary documentation. Lawyers would rather say “no” to the loan rather than miscalculate or take responsibility for the loan.
With many years of experience, we know how to assess property values to give the right LTV (Loan-to-Value-ratio). This analysis is key when evaluating whether a loan is suitable or not. Although 50% is as high as we go, we prefer to be on the lower end of that scale. Unfortunately, you can never make money by saying “no” to a good investment. Our job is to create a steady, fixed income for you. You need to invest your money in something to achieve a good return on your investment. Many lenders ask us if we think they are ready to assess a loan on their own here in Costa Rica. The answer is “no” – this only comes through years of experience and considering loans properly.
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