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Alternative Real Estate Funding? What’s That?

Are you wondering what the heck an “alternative” loan is? Well, you are not alone. This new type of funding for real estate is all the rage in investor circles!  

“That’s awesome!” you say. “Now, can you pleeeeeeease tell us what it is? I need a real estate investment loan, and quick!” 

You bet – let’s go! 

 

You already know you can go to the bank for real estate funding, and you likely already heard something about hard money real estate funding. Well, an alternative lender for real estate funding sits smack in between the two of them. 

Alternative loans are generally able to close funds for real estate faster than the bank and are cheaper than hard money. 

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To help explain further, we brought in the Merriam-Webster Dictionary for a little help: 

 

Definition: alternative (adjective)  

1: offering or expressing a choice  

2: not usual or traditional  

3existing or functioning outside of the established society  

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There you have it! We could not have said it better ourselves. 

Alternative lenders offer a choice beyond traditional lending, they are non-traditional in their speed to close, rates, leverage, and underwriting, and they exist outside of the traditional banking world.  

Let’s take a look at what this means for your next real estate funding loan. 

 

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 

 

Rates:  

Bank loans:   3.75% to 6.5% 

Alternative Loans:   4% to 10% 

Hard money:  10% to 15%  

 

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  

 

Underwriting:  

Bank loans:  Tax returns, credit and background checks, appraisal,  personal financial statements, bank account info and … 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) 

 

*Sidenote on appraisals: we use local appraisers rather than appraisers from large, national appraisal firms, which can be inaccurate, and slow down the appraisal process. 

 

Great news! We have a handy resource to help you decide  

which lender is right for your project.  

It’s a breeze to download it right here — and it’s Free!  

 QUICK REFERENCE GUIDE:  

LENDER COMPARISON: RATES AND TERMS  

BANK VS ALTERNATIVE VS PRIVATE VS HARD MONEY 

 

An alternative real estate funding loan makes sense for you if: 

  1. You need a quicker close than the bank can provide, but you don’t need to close sooner than a week. 

 

  1. You have good credit (640 or above) and some liquidity (cash on hand), but you don’t want to use it all to put down the 25% to 30% that the bank may require on a real estate investment loan.  

 

  1. You don’t need a no-doc real estate investment loan, but you also don’t want to spend weeks going through the typical bank’s underwriting procedures. 

 

  1.  You need a real estate investment lender that can work creatively and flexibly on developing a custom loan product for your specific project. 

 

  1. You are looking for an investment lender whose principals have substantial investment experience, who is highly knowledgeable in the investing space, and who can help you take your deal from offer to close. 

 

  1. You need a reliable lender who has a varied enough foundation of real estate funding sources that they are still able to lend when traditional lenders stop lending.  

 

There are all types of funding for real estate investors out there, and most investors with a long-term real estate investing gameplan will probably use them all at one time or another.  

Being aware of all your real estate funding options is a smart move, will make you a better investor, and will save you time and money overall. 

 

Get out there and hit it hard Investor Nation! 

The iFC Team 

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ARE YOU LOOKING TO FUND A FIX AND FLIP?  

WE’VE GOT MORE INFORMATION – MUCH MORE!  

 Download our Free E-Book   

iFC’S 10-STEP FIX AND FLIP GUIDE: HOW TO FINDFUNDFIX, AND FLIP A HOUSE  

This E-Book is packed full of actionable advice and tips from your friendly iFC team (and friends), and our best PRO tools to drive your fix and flip project forward at Mach speed!  

 

     

Built for Investors by 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.  

If you would like to learn more about what we offer, you can Schedule a Call with one of our Loan Officers or Get a Quote on your project. 

 

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