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For real estate investors looking to scale their business and increase profits, securing funding is a critical aspect of success. Traditional financing methods, such as bank loans, can often be slow, restrictive, and difficult to qualify for, especially when an investor is looking to fund multiple deals at once. Private lending has emerged as a viable and flexible solution for those looking to rapidly grow their portfolio. With private lending, investors can secure fast, reliable funding while avoiding the red tape that comes with conventional loans.
What is Private Lending?
Private lending involves borrowing money from individuals or private firms rather than traditional financial institutions like banks. Private lenders focus less on the borrower’s credit history and more on the value and profitability of the real estate deal. Because private lending is primarily based on the property’s potential, it provides more flexibility, faster approvals, and fewer requirements than conventional financing methods.
For investors managing multiple deals, private lending can be a game-changer, offering quick access to capital that allows for multiple projects to proceed simultaneously.
Why Private Lending is Ideal for Multiple Real Estate Deals
When juggling multiple real estate deals, timing and speed are critical factors. Here’s why private lending is ideal for investors handling several properties at once:
- Fast Access to Capital: Private lenders often approve loans within days, not weeks or months, as is common with traditional banks. This quick turnaround allows investors to move on deals faster, avoiding the delays that can cause missed opportunities.
- Flexibility with Terms: Private lenders offer more customizable terms when compared to conventional financing options, allowing for agreements that align with the investor’s goals. For example, many private lenders offer interest-only payment plans, which allow investors to focus on maximizing their cash flow while they complete multiple projects.
- Less Emphasis on Personal Credit: Instead of focusing heavily on personal credit scores, private lenders are more interested in the deal itself, and even the property’s potential value after repairs or renovations. This means that even investors with a modest credit profile can qualify for loans, which is especially useful when managing multiple projects simultaneously.
- High Loan-to-Value (LTV) Ratios: Private lenders typically offer higher LTV ratios, meaning they will finance a larger portion of the property's purchase price and rehab costs. This allows investors to take on more deals with less of their own capital.
How to Use Private Lending to Fund Multiple Deals
Investors interested in scaling their real estate portfolio can take several strategic steps to maximize the advantages of private lending. Here’s how:
Build Relationships with Multiple Private Lenders
One of the most effective ways to fund multiple real estate deals with private lending is by building relationships with several private lenders. Having a network of lenders at your disposal ensures that you have more options and faster access to funding when you need it. Some lenders may prefer working on smaller projects, while others may be more interested in larger, higher-risk deals. By maintaining relationships with different lenders, you can match each project with the most suitable funding source.
Present a Strong Deal
Private lenders are primarily interested in the profitability of the real estate deal. To secure funding for multiple deals, ensure that you present each project in a professional, detailed manner. Be prepared to showcase:
- Purchase price of the property
- Estimated after-repair value (ARV)
- Detailed renovation costs
- Expected timeline for repairs and resale
- Profit projections for the deal
By demonstrating that each deal is well thought out and likely to generate a return, you will increase the likelihood of securing funding for several projects at once.
Use Leverage to Maximize Capital
Private lenders typically offer higher LTV ratios, which means you can finance a larger portion of the purchase price and rehab costs with borrowed funds. This allows you to use leverage to acquire more properties at once, rather than tying up your own capital in a single deal. By spreading your own capital across several projects, you can increase your overall returns without overextending your personal finances.
Time Your Projects Effectively
When using private lending to fund multiple deals, it’s essential to manage the timelines of each project strategically. Stagger your purchase, renovation, and sale timelines to ensure that you have a steady stream of projects being completed at different stages. This allows you to cycle through properties more efficiently, maximizing cash flow and ensuring that you always have one or more deals moving toward completion.
RCN Capital
The easiest way to save on rental property financing is to find a trusted lender that can get you 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. RCN Capital also has flexible and competitive loan options available. Are you looking to purchase or refinance an investment property?
