Skiing vs. Alternative Real Estate Loans (Yes, we’re serious!)
by: Ryan Herting/CEO: i Fund Cities
Anyone who has ever needed funds for a real estate investment knows what a bank loan is, and most people investing in real estate know what a hard money loan is.
But, since forming my lending company, i Fund Cities in 2018, I have learned that many people seeking real estate funding or construction financing have no idea that there is another lending option for real estate investors — “alternative loans.”
“What the heck is an alternative loan?”
Glad you asked! Let’s go skiing and we’ll talk about it.
Ok. I can’t really go skiing today but, just for fun, let’s talk about skiing anyway – and how it can relate to fix and flip, rental, new construction and multifamily funding for real estate investors. (Even if you are not a skier or rider, follow along with me here!)
As you know, there are tons of options on ski mountains: there are some sweet green runs (beginner), rad blue runs (intermediate), and badass black/double black runs (advanced).
Why are there so many options at a ski area? Because on any given day, everyone on that mountain wants and needs something different! They may want a ski run groomed to perfect corduroy, or monster-sized moguls (bumps) that kick their butts, terrain parks for their gnar new tricks, or just a gondola ride to take in the stunning mountain views.
What does all of this have to do with “alternative” loans?
The point is that on ski mountains, as in real estate investing, options are a good thing. As a real estate investor, why limit yourself to just bank loans and hard money funds for real estate, when there is an entirely different part of the lending mountain to play on?
To continue my ski analogy, if bank loans are green runs, and hard money loans are black runs, then alternative lending platforms, which fall between the two in terms of speed to close, rates, leverage, and underwriting, are the blue runs of real estate funding options.
Let’s do a quick comparison of real estate funding options:
Speed to close:
Bank loans: 6 to 8 weeks (and up to 2 months)
Alternative Loans: 7 to 14 days
Hard money: 24 hours to a week
Bank loans: Lowest
Alternative Loans: Mid-Range
Hard money: Highest
Leverage: (The lower the leverage, the more cash you will put into the deal)
Bank loans: Low
Alternative Loans: High
Hard money: Medium to High
Bank loans: Tax returns, credit and background checks, appraisal, personal financial statements, bank account info, the kitchen sink.
Alternative Loans: Real estate experience, property details, purchase price, rehab budget, after repair value (ARV), and borrower liquidity (not tax returns), appraisal*.
Hard money: Minimal (the loan is based on the asset).
- (Quick appraisal tip: be sure to choose a lender that uses local appraisers. Some alternative lenders use big, national, appraisal management companies, which can delay the process and lower the appraisal quality.)
How do I know all of this?
It is because my company, i Fund Cities, is one of the top companies offering alternative loan funding for real estate investors. We are a great alternative real estate funding option for investors for fix and flip, fix to rent, new construction, rental, build-to-rent, and portfolio rental and construction financing and refinancing.
The important thing to keep in mind is that, just as there are many ways to enjoy the ski mountain, there are many ways to get funds for real estate projects. In fact, as their portfolios grow, most investors will use all these types of real estate funding at some point in their real estate careers.
Depending on the type of project you seek to fund, an alternative real estate funding loan may just be the best “run” to get you where you are going (which hopefully includes some apres-ski), a little bit faster and easier.
Built by Investors for Investors
i Fund Cities is an “alternative” lending platform offering custom real estate funding options for every level of investor, across a full range of lending products. As investors ourselves, we are just like you: hustle and grit, not suit and tie. We give you speed, transparency, knowledge, and a personalized investing partnership that you are just not going to find anywhere else.