Hard Money, Private Lending & Banks

Securing financing is a critical component of real estate investing. Whether it’s a loan for a fix-and-flip project, capital for purchasing a multifamily property as a long-term investment, or a line of credit to expand a rental portfolio, investors need financing to make their deals happen.

Both experienced investors who are growing their portfolios and new real estate investors who are making their first purchase usually find that working with a lender is the most common way to obtain financing for investment properties. However, choosing the right type of lender can be a challenge.

When considering options like hard money loans, traditional loans, and private lenders, it’s important to understand the differences between each type of loan and how they work for your real estate investment strategy. In this guide, we’ll help you understand the benefits of each type of investor loan and help you determine which option is right for you.

Traditional Loans for Real Estate Investors When it comes to real estate investment loans, some investors choose between banks for traditional loans or hard money lenders. It’s important to note that banks typically have strict loan terms that may not be negotiable. Also, using traditional loans for investment properties is different from using them for residential properties and has different requirements.

General Requirements for Traditional Loans:

• A down payment of around 20% is typically required
• Most bank lenders require a high credit score and a strong credit history
• Many bank lenders are not open to using W-2 income for borrowers
• This type of loan usually offers the lowest interest rates of all loan types
• Underwriting documentation is more intense and takes longer
• Borrowers need to show liquid assets that equal to six months’ worth of payments

It’s important to note that there is a limit to the number of conventional loans one person can have at any one time. Many investors start with traditional loans, but eventually hit this limit and need to seek financing through alternative loan options.