An Investor Loan: The Benefits and Essential Points to Consider
As an investor in real estate, you may already be accustomed to the process of applying for loans. However, if you're investing in properties with the intent to "flip" them or repurpose them, you're in a different category than other investors. You may need to look into obtaining a private money loan for investor loans. With a private money loan, you will be able to access funds quickly and efficiently for a short-term investment.
What is a Private Money Loan for Investor Loans?
A private money loan is a type of real estate loan that is secured by the property itself and typically used for non-owner-occupied investment purposes. These loans are funded by private investors, not traditional banks or mortgage institutions.
Private money loans are often used by real estate investors looking to purchase or refinance quickly, especially when conventional financing isn’t a fit due to credit, timing, or documentation constraints. Approval is based primarily on the value of the property, allowing for faster closings and more flexibility in unique scenarios.
How Does a Private Money Loan Work for Real Estate Investors?
A private money loan is accessible within a short period, typically within 7 to 14 days, whereas a regular loan could take several weeks or months. In order to acquire funding, the investor must supply some form of collateral (usually property) and show the projected return on investment. Interest rates on private money loans can be higher than traditional loans, but overall, the benefits can outweigh the cons for those engaged in fix and flip scenarios. Rather than tying up long-term loans, investors can utilize and pay back the money more quickly, leaving no debt remaining.
What Types of Properties Can Be Financed with a Private Money Loan?
A private money loan can be utilized for any type of property, commercial or residential. However, the focus of the investment must be on quick turnaround. For instance, the investor may prefer a property to be purchased below market value, fix it up to turn around the investment for a quick gain. Properties that are usually thought of as being riskier could be considered viable investments, as well as:
- Distressed Properties
- Foreclosed Properties
- Short Sales
- Residential Investment Properties
- Commercial Properties
