When it comes to real estate investment, you have probably heard the phrase “private money loan.” While private money loans are commonly used within the realm of real estate investment, there tends to be a lot of confusion regarding the term. So, what is a private money loan, and why are they important to real estate investors?
While the term “private money” implies otherwise, as a real estate investor, it is actually quite simple to deal with private money lenders to fund your property investment. Private money loans are designed to work for the short-term, and as such, close quickly and provide funding that’s ideal for you to secure a deal, fund the property rehab, and earn a great profit margin.
Real estate investment loans can come in many shapes and sizes, but private money loans are used specifically by house flippers and real estate investors to fund rehabilitation of an investment property. Most banks will not finance the rehabilitation of an investment property, since most of the time the property is distressed, old, or damaged. However, private money loans, otherwise known as bridge loans, flipper loans, or landlord loans, are designed to finance the purchase and repair of such properties.
Unlike most bank or mortgage loans, private money financing is not provided for owner-occupied property. Instead, they are designed to benefit the strategies of those who flip houses for profit. Working with a private money loan for your real estate investment is, ideally, the same as purchasing the property with cash, and the short-term of the loan is perfect for investors who plan to fix and flip their investment. Private money loans are based on the value of the property after it is repaired, otherwise known as the ARV (after repair value), instead of the actual value (AV) of the property. This feature allows you to acquire maximum leverage for your investment and still finance the repairs when you fix and flip, or fix and rent, your property.
Private money loans work for real estate investors in many ways, but one of the main benefits is the fast turnaround for funding. While a conventional bank loan can take upwards of 30 – 45 days, Sherman Bridge offers pre-approval in as little as 30 seconds, and you can obtain private money funding in as little as seven days. This fast pace is ideal for real estate investors, and a quick close of a private money loan provides an advantage for most investment strategies. Sherman Bridge also offers flexibility when it comes to financing your investment with the option to repay your loan up to 30 years.
The biggest advantage of private money is the flexibility to fund renovation expenses. While investment properties often provide some equity, investors create a profit margin after a property improvement. Private money is the critical component of successfully flipping an investment property and provides a quick purchase of the property while still leaving plenty of room for repairs.
Sherman Bridge specializes in hard money loans for your property investment. We understand that with less money down and low interest rates, our investors will have more equity and more cash flow to continue to fix and flip properties. Our loan products are designed specifically for real estate flippers and investors, and can fund your property rehab to earn maximum profit. When it comes to speed and efficiency to support your real estate investment strategy, private money loans by Sherman Bridge will be your perfect partner.