Real Estate Financing Should Be Painless!

November 18, 2021 If you’re an investor you know all too well the anxiety that comes along with obtaining financing for real estate properties. The endless searching for the right lender; one who will offer the best terms and rates with the lowest down payment. It can seem like a daunting task. Whether you are an experienced real estate investor or a newbie, the information out there concerning financing opportunities could give you a splitting headache! My purpose in writing this article is to shed some light on the differences between Private Lenders and the Banks. Most real estate investors think that the banks can offer the “best” terms and rates. However, when we look between the lines, the small percentage of “would be” bank clients who actually get their loans approved – is small. The reasons are many. Banks are highly regulated by the State and Federal Government. There is a long list of requirements a borrower has to meet in order to qualify for bank financing. These include: · Stepping up to the plate with a “perfect credit score” with no credit issues at all · Property must be stabilized –(rental properties must debt-service (DSCR) to purchase or refinance) · Small loan request-(nothing above $15 Million) · The property must be in an MSA. (Metropolitan Statistical Area) – Major City If you can jump these hurdles, a computer program – NOT a person, will decide if you qualify for a real estate loan. In addition to fitting yourself through the eye of a needle, banks will subject you to high fees (such as a high legal document prep fee – up to $15,000), high Prepay Penalties and a long wait (sometimes up to 90 days) to see if you are approved. Hmm… Now enter the world of Private Financing. What a different world it is! Private Financing tends to have a bad reputation. Investors worry that the rates will be so high they can’t make a profit on their investments. The rhetoric out there is Private Financing comes with high rates and high fees. It just isn’t the case! Here are some major advantages to choosing Private Financing: · Financing can be achieved with a credit score as low as 650 – credit issues are looked at on a case-by-case basis · Compensating Factors such as strong assets and 3 years of “recent” real estate investing experience can go a long way in approving your loan · Flexible guidelines that allow market rents for the DSCR requirement and a 90-day grace period to lease up the property · Investment can be located in a smaller city-usually with a minimum population of 150,000 · Loan requests for Commercial and Residential Real Estate can go up to $100M · Investor is approved based on negotiating with their Loan Officer – NOT a computer program · Loan Officers are available after hours – No bank hours here · Fast Funding – in as little as two weeks · The best part – Rates start in the high 7's! Wow, what a difference! It is my hope that this informative article has helped shed some light on the qualification procedure with Banks vs. Private Lenders. When considering investing in real estate to build wealth, it’s important to know there is a multitude of options available to qualify for purchase, rate & term refinance and cash out refinance. If further clarification is needed, I can be contacted via email: Blog post description.