Are you interested in getting a real estate loan for your project? Whom should you approach? These are the questions that many budding real estate developers have asked. Most developers start with real estate loan lending. But the funds involved in real estate development are hefty, the reason many developers find it hard to get funding when starting. However, financial products for real estate development have increased and become more flexible. Here are the most popular avenues for real estate lending today:
A Conventional Commercial Loan
Banks are still one of the popular venues for lending. Their long history has given insight into creating different financial products for residential and commercial real estate development. You can find a real estate lending program depending on your financial history and the funds you need.
Conventional bank loans have strict requirements to meet their due diligence procedures, making loan processing lengthy. However, banks have a lot of financial muscle and can support big projects.
Hard Money Lender Financing
A hard money lender provides loans for things like investing in real estate or personal needs for quick cash. This lender has more flexible requirements but asks for higher interest rates because of the higher risk.
You can approach a hard money lender for real estate loan lending for short-term projects like renovating a property for flipping. It is also useful as stop-gap financing before arranging for longer-term low-interest financing.
Equity on an Existing Property
You can use an existing real estate property as collateral for a loan. If it is a residential property, ask your lender for mortgage refinancing options. It is a low-interest option because the lender is assured of covered risk. However, you risk collateral loss if the project falls through.
You can access a real estate loan lending program from private and mainstream banks. Private mortgage lenders are more flexible but have lower funding levels than bigger mainstream banks.
Funding from a Joint Venture
You can access funding in a joint venture where you cooperate with other investors. A joint venture for real estate development is a partnership between two or more parties where each participant contributes capital, expertise, or other resources to the venture.
The typical joint venture for real estate sees the developer bring in non-cash contributions, for example, access to prime land or connections in the local construction industry.
Are you short of lending for a promising real estate project? Talk to your lender about a possible real estate loan lending program for your real estate development.