3 Reasons You May Need a Private Money Loan This Year
Since the recent financial crisis, more and more real estate investors are using non-bank, private money loans to finance their investment properties. During the period of 2008 to 2010, many banks weren’t lending, and credit in general was tighter than a drum. This opened up the area of private money lending to unlimited opportunities for commercial bridge lenders, hard money lenders, and other private money lenders. In fact, the real estate recovery was largely influenced by the availability of non-bank loans when banks were suffering. Real estate investors have long used hard money loans to finance their property purchases because of their ease of access and their swiftness. Here are just 3 reasons you may need a private money loan in 2014:
1. Chasing Value? More investors are chasing investment properties in second and third tier markets this year looking for value. With most commercial bank lenders focusing on the best properties in only the top tier markets, many non-bank, private money lenders have started following investors and financing their deals in second and third tier markets.
2. New Development or Construction Projects in the Works? Lending may have opened up considerably for some property types, but nowhere is credit still so tight as it remains in new development and construction.When banks are using any reason to say no to these loans, it is so much easier to get private money loans for new development and construction projects.
3. Increased Competition for Loans: CMBS loans maturing this year and increasing in volume in 2015 will no doubt increase the competition for commercial loans all across the board. A large percentage of these maturing CMBS loans may be over leveraged, and thus borrowers needing to refinance may be forced to bring in equity. Because private money loans are sometimes made at a higher loan to value than the typical commercial bank loan, a private money loan may be the answer for a borrower looking for a commercial refinance this year.
These are just 3 big reasons why you or one of your clients may need a private money loan in 2014. If you are chasing properties in less favored markets, or if you are engaging in new development or construction projects, private money loans may be your only option. And with increased competition for commercial loans all across the board, knowing who to go to for a private money loan is critical this year. If you’ve never borrowed a bridge loan before, here are 5 tips for closing your loan quickly. Don’t be left without a chair when the music stops in 2014. Be prepared with multiple options for financing your investment properties this year.
Posted by Corey Curwick Dutton