How Brokers Can Utilize Private Loans to Stand Out in the Competitive Real Estate Market

There are many benefits to utilizing private loans for real estate investments, especially in today’s fast paced market environment. These loans offer unmatched flexibility, speed, and less stringent application requirements, which make them very appealing to real estate investors. It allows them to fund more deals, and still qualify for financing even with non-traditional investments like home flips. Private loans are a very powerful tool and adding them to your repertoire means you can position yourself as a resourceful partner that’s able to fund a wide variety of investments. Continue reading as we break down why private loans are so valuable in today’s real estate market, and how brokers can utilize them to stand out to your clients.

Understanding Private Loans

Private loans simply refer to any type of financing that is provided by a private entity, such as a person or organization that’s willing to lend money. Private lending is often less formal than financing provided by traditional institutions like banks or credit unions, but lenders that operate in the real estate space still typically have a formal loan application process. The flexibility that private loans can provide is key however, since it means loans can be approved faster, and borrowers can still qualify for financing with less than perfect credit. More flexibility also means lenders can fund a large range of deals, including home flips, new construction, and bridge financing projects.

Why Private Loans Appeal to Real Estate Investors

Let’s talk about a few key scenarios where private lending is an ideal financing solution.

• Fix & Flip Projects: Private loans have more customizable terms, including a shorter loan period which is more suitable for fix and flip projects. They can also provide additional funds to cover renovation costs, on top of the standard costs of acquiring a property.
• Bridge Financing: Private loans can be used to cover gaps in an investor’s finances, such as acquiring a new property while in the process of selling an existing home. This gives time for the investor to complete their transaction and repay the loan when they have the funds available.
• Rental Properties: Unlike conventional mortgage loans, qualification for private rental property loans is based on the cash flow of the investment rather than the borrower’s creditworthiness. Lenders will be more interested in whether the project is going to be a profitable investment in the long run.
• Increasing Leverage: One of the only ways to secure funding for a property that is already financed is with a private loan. This can be good for making renovations to a rental property before securing more permanent funding, or for saving a stalled project due to insufficient capital.
• New Construction: While conventional mortgage lenders often have strict requirements, private lenders are typically more willing to fund new construction projects, so long as there is evidence it will make for a good investment.

Benefits of Offering Private Loan Options

For brokers and correspondent lenders, offering private loan options can be a huge advantage. Investor clients may come to you with various problems that cannot be solved with conventional loan programs, and this is where private loans offer a great alternative. By providing a range of solutions, you can serve these niche markets and better cater to the unique needs of each borrower that comes to you. You can also position yourself as a flexible and resourceful partner, helping you build lasting relationships with your clients. This makes clients more likely to come back to you for repeat business and think of you first when they run into financing difficulties.

Strategies to Effectively Utilize Private Loans

There are some key strategies you can utilize to make the most of private loan solutions for your business. You should seek out several different private loan providers to obtain a variety of loan solutions that you can then provide to your clients. Highlight the speed and flexibility of these loans when recommending them to your investor clients, as well as their ability to fund unconventional deals. When an investor approaches you with a financing problem that is difficult to solve, there’s a good chance you will already have the perfect solution waiting for them.

Tips for Brokers to Stand Out with Private Loans

To stand out as an expert broker in the private lending space, there are a few techniques you can make use of. Start by taking the time to educate your clients on the differences and terms of each type of financing program. You should also be eager to learn the specifics of their deal, and consider their investment goals, to help match them with a program that’s most suitable for them. You can also stand out by positioning and marketing yourself as a problem solver, with a variety of solutions for financing any sort of real estate investment.

Collaborating with Private Lenders

We want to end with some tips for building relationships with private lenders. Ideally, you will want to seek out partnerships with lenders that have experience in real estate, as they’ll be able to provide a smoother financing experience for your clients. Many lenders also have programs for brokers and their wholesale partners, and will be able to provide tools, resources, and marketing materials to support your business. As you continue to build a relationship with them, they may also be able to provide you with additional benefits like a streamlined application process, which can be a key advantage for clients especially in today’s competitive real estate market.

RCN Capital

The easiest way to save on an investment is to obtain financing from a real estate 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. If you are looking to finance a real estate project, RCN Capital has competitive loan options available.