Once you have a real estate investment property under contract, one of your first major decisions (unless you are cash-rich, and if you are, good for you!) is going to be which real estate investment lender you will use to fund your project.
Are you going to the bank for a loan? Are you going to use a hard money lender? Do you have a private lender, or family member who will lend you money? Is there another alternative type of loan that could work for you, that you might not even know about yet?
If your head is spinning, we are here to help!
We are going to tell you what types of real estate investment lenders are out there, and help you understand how to decide which one is best for your investment project.
Let’s dig a little deeper.
The Bank
If you have a longer timeline (15-24 months or more) to finish your real estate investment project, solid financials, a good credit history and credit score, and 25% to 30% of the purchase price of the investment property to put down, start by approaching the bank for your real estate funding. (Be aware that some banks are becoming hesitant to loan on “scatter” residential, meaning funding investment properties over a variety of zip codes.)
If you can meet the bank lender’s strict standards, you will likely get the lowest interest rate for your investment project. (However, because every project is so different, and this may not always be the case.)
Alternative Lenders
If you cannot meet the bank’s loan criteria, the next real estate funding option is one that many investors are not even aware of. This is called “alternative” real estate lenders (yes, like i Fund Cities).
These real estate investment loans provide a solid mid-point between a bank loan and hard money loan in terms of speed to close, leverage (how much money you put down), interest rate, and underwriting.
An alternative real estate investment lender can usually close your loan faster than the bank, while offering higher leverage (less money out of your pocket), and less paperwork.
For example, at i Fund Cities, our underwriting for real estate funding includes reviewing bank statements, doing a credit and background check, and getting an appraisal (we use local appraisers, as large national appraisal management companies can delay the appraisal and comprise its quality). But we are not going to probe you for everything under the sun, like the bank does.
An alternative lender’s real estate funding rates for your project will be higher than a bank loan, but they will be lower than a hard money loan.
At i Fund Cities, we take a good look at your real estate investing experience, the asset itself, and your investment project’s business plan.
Hard Money Lenders
You have probably heard the term “hard money” loan. A hard money lender is a good option if you need to close your loan in a matter of days (which can easily happen in a competitive market).
Hard money lenders have about the same leverage as alternative real estate lenders, meaning you will need to put about the same amount of money down on your investment project.
These types of real estate lenders require little documentation as the investment loan is based on the asset alone. However, you will pay for the quick speed to close and no-docs, as hard money lenders are the most expensive real estate funding you can use for your investment project.
Private Money Lenders
Private money lenders can also be an option for some real estate investors. Private real estate funding may come from family and friends, or other individuals who lend from their own 401k’s, IRAs, or personal funds.
The rates and terms for private investors funding your project will be similar to those of alternative lenders. One advantage is that, with private investors funding your real estate project, there is often little underwriting, and many private investors can act quickly for a good deal.
We understand that this is a lot of information to consider.
That is why we created this Free and Downloadable easy-to-read summary and
LENDER COMPARISON: RATES AND TERMS
BANKS VS ALTERNATIVE VS HARD MONEY VS PRIVATE
DOWNLOAD HERE
There are many real estate investment lenders out there, and many lender types. Being educated about what investment lender choices you have along the entire lending spectrum could help to either make or break your deal.
Best of luck everyone out there in Investor Nation and give us (alternative) lenders a call if you have a real estate investment deal you need funded!
The iFC Team
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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 Contact Us with general inquiries, or Get a Quote on your project.