Property investing is not a minimal-resource enterprise. You cannot get into a deal with a few hundred dollars. When you are buying real estate – especially when it is commercial real estate – you’re looking at investments worth hundreds of thousands to millions of dollars. Borrowing from one or more lenders is part of the game.
What if your primary lender is dragging you down? What if you are losing out to other investors whose finances seem to be in better order than yours? It is possible you need an alternative lending solution. Here are five signs that would seem to point in that direction:
1. Lender Decisions Take Too Long
As a real estate investor, you depend heavily on timely lender decisions to plot your acquisition strategy. Maybe you have your eye on a highly competitive property you know several other investors are interested in. You are willing to make a bold move, but not until you have some sort of commitment from your lender. If you need to wait a week or two, you’re probably going to lose the property.
Your first thought is whether any lenders can offer you decisions in a matter of hours? Among traditional lenders, probably not. Among hard money lenders, absolutely. According to Actium Lending out of Salt Lake City, Utah, speed is one of the hallmarks of hard money lending.
2. Funding Takes Even Longer
Perhaps you can get approval decisions from your lender in a timely manner. But you are still stuck because it could take 60-90 days to get the actual funding. This is a problem because you know that so many commercial real estate deals hinge on closing speed. The investor who can get to closing the fastest is usually the one who wins the deal.
Traditional lenders are known to take months to underwrite and fund loans. But once again, speed is what hard money lending is known for. Most hard money loans can be funded within a couple of days. Actium Lending has been known to approve, underwrite, and fund in as little as one business day when emergency circumstances warrant it.
3. You Are Forever Chasing Documents
Chasing documents endlessly is another sign you might need an alternative lending solution. Hard money lenders require comparatively few documents. They are more interested in the value of your collateral than any perceived creditworthiness. On the other hand, your traditional lender might be begging for documents up until a few hours before closing.
4. Loans Aren’t Tailored to Your Needs
Traditional lenders are very limited in their abilities to customize investor loans. That could be bad for you if a lack of customization limits your profitability or inhibits you from executing your strategy as planned. But no worries. Hard money lenders are a lot more flexible. They can tailor loans to the strict details of each and every transaction.
5. You Deal With Too Many Faceless People
You may need an alternative lending solution if dealing with your current lender forces you to interact with an entire team of people whose faces you have never seen. They are just names on an email list. As a result, the service you receive is hardly personalized.
Hard money firms tend to be much smaller and staffed by smaller teams. You’re more likely to deal directly with the lender’s founders or fund managers. You are also more likely to get personal service.
Traditional lending has its place. Sometimes it is even a good choice for real estate acquisitions. But more often than not, a better alternative for investors is hard money lending.
