Today’s real estate investors need speed, flexibility, and creative solutions to win deals in a highly competitive, low inventory market. If they rely solely on conventional mortgages, they can miss out on deals due to the slow and restrictive nature of these programs. Brokers who understand the conditions affecting real estate investment today know that in order to succeed, you need to expand your options. Offering flexible financing solutions from private lenders doesn’t just help your clients win, it also positions you as a reliable long-term partner that they can count on for deal after deal.
Let’s talk about the creative financing solutions brokers and lending partners have been utilizing to empower investors in today’s competitive market, and how adding them to your loan offerings can help you grow your business.
Flexible financing consists of real estate loans that don’t have the same restrictions as traditional mortgage programs. These loans are typically offered by private lenders who operate in the investment space, with financing based on property values rather than the borrower’s creditworthiness. Asset-based lending opens the door to a wider range of deals, such as home flips and transitional purchases which are harder to fund with conventional mortgages. Private loans can also be approved much faster, which is key for making winning offers in today’s competitive environment. As a lending partner, offering flexible loans means you can say yes more often, since unlike with one-size-fits-all financing, you can tailor loan terms to each client’s specific deal scenario.
One of the key advantages of private loans is being able to fund transitional purchases. This happens when a client wants to move forward with an acquisition, but their funds are tied up in another asset or the pending sale of a property. Bridge loans offer these borrowers a way to “bridge” the gap between the purchase and being able to secure more permanent financing for it.
Since bridge loans can be approved quickly, they might also be used to finance time-sensitive deals, such as auctions, foreclosures, or lucrative properties that need immediate funding. For brokers, they give you a way to offer expedited financing that helps you close deals when other lenders can’t.
As investors grow their real estate portfolios, they often run into challenges securing financing for additional purchases when using conventional mortgages. As a result, they turn to DSCR loans which use cash-flow-based underwriting rather than personal income for qualification. These loans are perfect for portfolio builders and repeat borrowers, since they don’t have limitations on the number of properties that can be financed (like FHA loans). They also don’t rely on W-2 income for approval, which means borrowers that receive most of their income from investments can still qualify for financing. Lenders can use DSCR financing to support long-term growth for their clients, and they can serve as a natural transition point after utilizing a short-term bridge loan.
Private real estate loans are an ideal solution for funding renovation projects like home flips and value-adds. Traditional lenders are not always willing to fund projects that require heavy rehab, as they might view these investments as too risky. Private lenders, however, offer programs specifically designed for renovation projects, with loan amounts based on after-repair value (ARV) that include additional rehab funds.
These loans can also be used to finance improvements on existing properties, like for updating an older rental property to improve rental income. After making the necessary updates, the investor will be in a better position to secure long-term financing with more favorable terms.
Brokers and lending partners should offer a variety of loan products, including bridge, DSCR, and fix and flip programs, because it helps you meet the diverse needs of investors. It also helps position you as a comprehensive loan partner that your clients can rely on for financing deals of any kind.
The great thing about offering private loans is that many of these products are complementary to each other. DSCR loans help you serve the needs of serial investors, and bridge loans allow them to make quick acquisitions when time is of the essence. Borrowers who use bridge financing also frequently transition to long-term loans, giving you more opportunities to generate business. Fix and flip investors tend to perform multiple flips per year, but if they plan to hold on to a property for rental income, you are ready to serve with long-term financing options. These programs are designed to help experienced investors who are frustrated with bank limitations, or whose properties don’t qualify for conventional financing. By meeting their needs, you benefit from a healthy source of repeat and referral business that strengthens your deal pipeline.
The financing partner you choose to work with has a direct impact on your ability to serve your customers. Partner with a wholesale lender that has a proven track record in the real estate space, and can provide clear program guidelines to eliminate any confusion with clients. Loan products should be designed with investors in mind, prioritizing speed as well as consistent execution to help them reach their goals. Customer service is also just as important as good programs; choose a lender that offers dedicated broker support so you can quickly resolve any issues in case they do come up. These qualities combine to help you provide a better experience for your clients, ensuring that their deals go smoothly and that they will be more likely to return to you for future investment opportunities.
To help your clients maximize the returns on their next investment, partner with a lender that can provide you with the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors and lending partners. If you are looking to offer fast & flexible financing to your clients, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.