Why Traditional Loans Aren’t Ideal for Fixed and Reverse Projects in Real Estate Investing
Traditional loans are a good way to get money for long-term projects that you would like to invest in, but not so good for short-term projects. This is mainly because banks generally have longer application processes and many requirements. All of this is understandable because their main focus for loans is businesses that take out huge loans and repay them over a longer period of time.
You might not need a million dollars for your first venture as a newbie investor in something like real estate. You probably need a few thousand dollars to spruce up the new building you just acquired and put it on the market.
Therefore, you need a loan that does not require a long process and that you can repay as soon as you return the property. Below are some of the reasons why you should get a loan from a private mortgage lender rather than a traditional lender like a bank or credit union when investing in real estate.
The accessibility of the loan
Property investment is different from other types of investing because time and opportunity are highly valued in the business. You may not have years to get a fixed project and reverse in the market and make a profit. The faster you repair and return, the better your chances of starting the next project.
If you get a loan that takes a long time to approve, the value of your property may not be the same when you get the loan.
Also, building materials and fixtures don’t have a constant price waiting for you to get the loan you want. Traditional lenders are strict on credibility and take longer to check your credit score, even when you have enough assets.
It’s important to look for a lender who understands real estate investing and is willing to lend for low-risk projects almost instantly. These lenders usually offer hard money and have easier application requirements and less demanding qualifications.
Traditional lenders finance long-term projects
Most banks and similar institutions will only lend to businesses or individuals investing in long-term, expensive projects. Their profits and returns are more in these loans, so they may not pay much attention to small projects that require a few thousand dollars, such as repair and inversion projects.
Therefore, a real estate investor with a small project that he wants to complete in less than a year should look for alternative lenders who do not hesitate to finance both long-term and short-term projects. Hard money lenders who offer fixed and reverse loans understand the business and can tailor the loans to the needs of the investor.
Before making this real estate investment decision, do some window shopping for a good solution and go back to the lender to develop a good source of money, look at their terms and if you find them acceptable, take that loan and put yourself at work. Traditional lenders will be best when you have a big, long-term project that requires a lot of money to start and complete.
Brad Bernanke Story