Funding real estate deals is an obstacle experienced by many investors, especially when they do not have their own money. Such investors wonder how they can invest in commercial real estate with little money. Most of them may be willing or unable to get funding from commercial and hard-money lenders. However, one of the best ways to get financing for your real estate business is by acquiring private loans.
Who is a Private Lender?
These are non-institutional lenders who offer financing to real estate investors to either purchase or renovate a property. Such loans are short-term, and the property in question secures them. Unlike institutional banks, private lenders provide loans for investors who want to increase the property’s value within a short time. The borrower is given a particular period to repay the loan.
When Do You Need A Private Loan?
Although there are many funding options for you, there comes a time when money from private lenders is the best option. Such incidences include:
Traditional banks offer loans primarily according to the borrower’s credit rating. However, private loan lenders do not necessarily focus on your credit score before financing your commercial real estate investment. As a result, the average loans granted by private lenders are better than those in banks because the borrower can negotiate the best terms and amounts that suit them better. A point to note is that getting private loans for residential property comes at higher interest rates.
In the real estate industry, having access to urgent money is the key to success. A lucrative deal may be laid out for you, but it will be wastage if you lack the money to fund it. Efficiency and speed are what you get when dealing with private loan lenders. The interest rate for private loans may be higher than traditional bank loans, but you will close more deals within a short period.
Need for Cash
Private lenders come in handy when you need actual hard cash to make any relevant offers, for instance, increasing the down payment amount. Most sellers are enticed by cash, and the investors with all-cash offers are in a better position to close the deal.
Trading in commercial real estate is a lucrative opportunity, but it requires intensive preparedness, especially financially. Talk to Lionheart Commercial Capital today to understand better how you can finance your real estate investment.