Real estate investor loans are typically based on the asset being used for collateral and not the ability of the borrower to repay the loan. In other words, real estate loans for investors are not necessarily scrutinized in the same way as a bank loan is. For this reason, many real estate lenders are concerned with the value of the property and its characteristics over the income and credit of the borrower. This is good news for real estate investors who have had hits to their credit scores in recent years. Particularly for those who have bankruptcies or foreclosures lurking in their pasts.
Other than the banks, who is offering real estate loans for investors? Private money lenders, also called “hard money” lenders, or “bridge” lenders, are the top sources of real estate loans for investors. Although the interest rates charged by these private money lenders are much higher than bank rates, real estate investors use these loans as tools to achieve their goals.
For example, a real estate investor makes offers on 8 properties to purchase. Of all 8 offers made, the real estate investor is able to get 3 accepted offers. Unless this investor has a large bank account, taking down all 3 properties simultaneously could be difficult. This investor would take out a private money loan against all 3 properties to make his or her own cash go further across the 3 acquisitions. These loans are a valuable tool which will allow this real estate investor to take advantage of multiple opportunities simultaneously. And most important, it doesn’t matter if this investor has bad credit or no credit, he or she is still eligible for a real estate loan from a private money lender. As long the 3 properties are valuable, in good neighborhoods, etc., there will be no problem obtaining a real estate loan to purchase them.