Increase the likelihood of getting the terms you want.
Private money lenders offer real estate investors speed, flexibility and the opportunity to take advantage of otherwise fleeting investment opportunities. Unlike banks, private lenders can often offer more flexibility in their terms and underwriting requirements – a significant advantage when time is of the essence.
But how can real estate investors better present their loan requests to private lenders in order to secure the most favorable terms and bring a deal to the finish line in the fastest, most efficient manner possible?
While a major advantage of using a private money lender, such as Juniper Capital, is the reduction of frustrating red tape, preparedness on the part of the borrower is key to unlocking such benefits. The following are some tips, from the perspective of an underwriter, for streamlining the loan process, and getting a funding commitment to capitalize on a real estate investment opportunity.
Paint a Picture
Unlike at a bank, where the loan underwriting process may be very mechanical, when talking with a private lender, remember you are talking to a person. Especially when working with a lender for the first time, take time to paint them a clear picture of you, your project, and what you are trying to achieve with their financing. Providing background about yourself and your experience, examples of past projects, and renderings or photos of your current project makes your loan request humanizes your application and will increase the likelihood of you getting a loan commitment.
Following up your initial inquiry with supporting documentation will go a long way towards fast tracking the underwriting process and getting you to closing. While private lenders generally require significantly less paperwork than banks, be prepared with basic personal financial information (a personal financial statement, credit report, and two years of tax returns is a good place to start) and property specific information (purchase and sale agreement, rent roll, leases, etc.).
One of the biggest advantages of working with a private money lender is flexibility, but a lender can’t address and work around what they don’t know about. Liens, judgements, defaults on a current loan and even environmental issues may not be deal breakers if disclosed in advance. However, when a potential lender discovers such defects through its own due diligence the odds of closing a loan become significantly less likely.
The bottom line, when working with any lender, clear upfront communication will go a long way towards getting the deal done.
Have a Budget
For construction and rehab projects have a line-item budget prepared and bid out. Lenders aren’t in the business of funding estimates, and having an established budget for the project allows your lender to better structure the loan so that you don’t pay for funds you don’t need or end up without enough funding to finish the work.
A well-presented loan request will greatly increase your likelihood of getting financing at the best possible terms and will allow you to capitalize on the speed and flexibility offered by private money lenders. At Juniper Capital, we are always happy to answer any questions you may have and walk you through the process. Contact us to start the conversation today. We specialize in private commercial real estate loans, hard money loans in the Pacific Northwest and more.