Why more investors are turning to private money for their real estate financing needs.
Private money lenders, or hard money lenders, often have the reputation of an option of last resort for individuals who cannot qualify for traditional financing. However, this is common misconception – many private lenders work with high-quality real estate investors, while providing many advantages over bank financing.
As banks have tightened their lending standards, an increasing number of real estate investors and developers have turned to private money to get more deals done, quickly and efficiently.
Private money loans can allow a real estate investor to capitalize on fleeting opportunities. On a typical commercial property loan, where a bank might take 2-3 months to close, a quality private lender may be able to close in as little as 2-3 days.
In the ultra-competitive Seattle and Puget Sound markets, a pre-commitment from a lender allowing an investor to offer a seller a 7-14 day close might be the difference in getting an offer accepted. The speed of private money can be a significant differentiator for investors seeking real estate financing.
While banks are bound to strict underwriting standards, private lenders may have significant flexibility. Every real estate deal is unique, and many great deals may not check all of a bank’s boxes for one reason or another. Private lender’s flexibility with regards to underwriting requirements and loan structuring prevent deals from getting caught up in red tape – not moving forward as opportunity passes the borrower by.
Endless document requests from a lender are a headache for investors, and often irrelevant to the project for which financing is being sought. Compared to banks, private lenders often require significantly less personal financial information from potential borrowers. Additionally, many private lenders value properties using a broker’s opinion of value as opposed to a full appraisal – saving the borrower both time and money.
Quality private lenders have the flexibility and expertise to analyze each loan scenario independently to determine a structure best suited for a borrower to achieve their objectives. Private lenders can function as a valuable partner to real estate investors.
Behind speed, creative structuring may be the most significant advantage to working with a private lender.
At Juniper Capital, we think outside the box to create win-win deals for our clients – maybe it’s time you think outside the bank. Call us today to start the conversation. We specialize in Seattle real estate loans, hard money loans in the Pacific Northwest and more.