If you needed a loaf of bread, there’s a good chance that you’d likely go to the corner grocery or maybe even a local bakery to buy one. While there are other places you can go, you’ll likely pay considerably more, and there’s a very good chance you won’t find a loaf of bread in a place like a hardware store. When it comes to real estate financing, the same principle applies – just in a slightly different way.
#1 – They Know How Real Estate Works
When you go to your local bank and ask for a loan, there’s quite the process that you’ll need to get through before you’ll see any sort of funding. First, you’ll need to gather your documents, and then you’ll need to give permission for the bank to obtain a copy of your credit report. Though you should expect these things regardless of where you want to borrow money, it’s important to remember that at a traditional bank, the main factor in whether you’ll be approved for a loan is your credit history.
When you choose to go to a lender that specializes in real estate investing – or better still, a small lending group comprised of people who are real estate investors themselves – things are different. Your credit history is still a factor, but real estate professionals also consider things like the value of the property both now and in the future. In other words, if your credit isn’t perfect, you won’t automatically be denied.
#2 – They Can Provide Invaluable Guidance
Real estate investing can be tricky, especially for those who are still relatively inexperienced. Say, for instance, you run into an issue with a title or deed and you’re not sure how to proceed, or maybe you want to consider the benefits of long-term financing rather than short-term opportunities. A specialized lender is always the better choice because they’re more than just a source of money. They’re partners and people you can turn to when things get complicated, when you’re interested in new types of investing, or you just have questions.
#3 – They Know the Local Market
Sound real estate investing is built on a few basic principles, and one of those principles is the fact that the market can be incredibly different from one state to another or even from one neighborhood to another. The location, condition, and even the architecture of a property can have a tremendous impact on its value, and this is something that most traditional lenders simply won’t know.
While a traditional bank may know the value of a property as it is by looking at tax assessments and appraisals, they don’t have the knowledge or experience to understand the property’s potential value after being renovated or converted into multifamily housing. This is where a specialized lender truly excels. They know the local market and they dig much deeper to help you get the funding you need.
Whether you’re a new or an experienced real estate investor, it’s important for you to consider the various sources of funding available to you. For the three reasons listed above, it’s always better to obtain your funding from a specialized real estate lender. They understand the local market, they can give you guidance, and they look at much more than just your credit history.
