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The Future of Private Lending

With many investors turning to private lenders for their real estate finance requirements, the private lending sector has experienced tremendous expansion in recent years. It’s crucial to consider the future of private lending and make forecasts & projections about where the sector is headed as the market continues to change.

Growing Use of Technology

The growing use of technology is one of the most important trends in the private lending sector. Connecting borrowers and lenders has become simpler thanks to online lending platforms, and many private lenders are embracing automation and digital tools to optimize their operations. More private lenders are anticipated to embrace technology to enhance their business processes and maintain market competitiveness as a result of this development.

Focus on Specialty Markets

The focus on specialty markets is another development in the private lending sector. Private lenders, like fix-and-flip investors or real estate developers, are increasingly specializing in particular loan types or borrowers. As a result, they are better able to comprehend their clients’ demands and provide specialized financing options. We may anticipate seeing more private lenders focusing on niches to set themselves apart and draw customers as the market becomes more competitive. For example, a private lender in northern California may specialize in loans related to the wine or hospitality industries.

Regulatory Environment

The regulatory environment for private lending is likewise evolving. In recent years, there have been moves to impose more rules on private lenders and the Securities and Exchange Commission (SEC) has been closely examining the sector. While some industry experts worry that further regulation could hamper expansion, others think it will boost the sector’s legitimacy and ultimately be advantageous to both lenders and borrowers.

Urbanization

Numerous experts anticipate that the trend of urbanization will continue in terms of the real estate industry. Private lenders will play a big role in funding real estate development projects as more people move to cities and the demand for housing rises. Additionally, if alternative housing options like co-living and co-working places become more popular, new opportunities may arise for private lenders.

Shifting Demographics of Investors

The shifting demographics of real estate investors are another trend that is expected to have an impact on the future of private financing. Financing alternatives that are tailored to the specific requirements and preferences of millennials will be more in demand as more of them enter the workforce. This might entail more accommodating lending terms, technological loan management systems, and a focus on environmentally and socially conscious investing.

Overall, the outlook for private lending is positive, with future growth and innovation anticipated. Despite the dangers and ambiguities, the sector is ready to adjust to shifting market conditions and provide real estate investors with useful financing options. To make the most of these opportunities, it’s crucial for both borrowers and lenders to stay informed and keep up with the most recent trends and developments in the market.

If you are looking for a quality private money lender in Northern California, give Altus Capital Group a call at (707) 932-5887.

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Private Lending vs. Crowdfunding: Which is Right for You?

  • A comparison of private lending and crowdfunding options for real estate investors
  • Keyword focus: private lending, crowdfunding

There are several alternatives available for financing real estate transactions. Crowdfunding and private loans are two well-liked alternatives. Each of these solutions has pros and cons, and the investor’s needs and objectives ultimately determine which one is best for him or her.

Private Loans

Instead of a regular bank or mortgage lender, private lending is borrowing money from a person or a private lending business. For real estate investors who require immediate access to funds or who struggle to meet the requirements for conventional loans, this can be a good choice. Additionally, private lending gives borrowers the opportunity to bargain loan terms directly with lenders, which may lead to more lenient conditions and quicker funding.

The possibility of higher interest rates than those offered by conventional lending choices is one drawback of private lending. This is because lending to investors who might not match the same requirements as conventional borrowers exposes private lenders to greater risk. Additionally, borrowers’ assets may be at danger if private lenders demand security to secure the loan.

Crowdfunding

On the other hand, crowdfunding entails collecting money from a huge number of people via an online platform. Given that crowdfunding campaigns can reach a bigger audience, this can be a useful choice for investors who need more money than they can get through private loans. Investors can diversify their funding sources and potentially reduce their borrowing rates by using crowdfunding, too.

Crowdfunding does, however, provide a unique set of difficulties. There is no assurance that the campaign will be successful in raising the appropriate amount of money; investors must be able to persuasively pitch their project to potential supporters. Additionally, the cost of borrowing may increase due to the frequent fees and percentages taken from funds received through crowdfunding services.

Which One Fits You Best?

Investors should think about their personal financial status, the quantity of funds they require, and their borrowing objectives when picking between private loan and crowdsourcing. Investors that require quick access to funds and are prepared to pay higher interest rates in exchange for more flexible terms may find private lending to be a useful alternative. For investors that want a greater sum of money and are prepared to devote the time and energy necessary to promote their project and cultivate a community of backers, crowdfunding may be a better alternative.

The investor’s objectives and risk tolerance ultimately determine which financing method they will use—private lending or crowdfunding. Both alternatives can be efficient ways to finance real estate purchases, but before choosing one, investors should carefully weigh their advantages and disadvantages. Making an informed decision and navigating the mortgage process are two more benefits of working with a financial advisor or real estate expert for investors.

If you are looking for a quality private money lender in Northern California, give Altus Capital Group a call at (707) 932-588.

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Adding Real Estate Debt Investments To Your Portfolio

 

Join us on March 16th to learn about how investors are about to take advantage of a title wave of private debt investment opportunities!

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Private Money Lending in Northern California

5 Qualifications to Get a Private Money Loan

A private money loan is a short-term loan secured by real property, usually for a new purchase. While all real estate loans are secured by the property, private money lenders focus their underwriting on the property versus the borrower, which is where traditional lenders like banks usually focus their underwriting. The private money lender makes loans against property with the knowledge they can take the property to foreclosure, and possibly obtain ownership, if the borrower doesn’t stay current on their payments.

Borrowers are surprised to hear that private money loans have different qualifications than traditional loans. For instance, because private money loans are asset-based, loan approval is usually not contingent on the borrower’s credit score. Here are things private money lenders check when making lending decisions.

Equity

One of the first things that private money lenders check when deciding whether to lend to an applicant is their equity in the property, that is, the portion of the property they own outright.

An applicant’s equity in their property is calculated by subtracting the amount they owe on their mortgage from the appraised value.

Altus Capital Group specializes in being able to creatively structure loans to maximize leverage applied to the subject property.

Real Estate Investing Experience

Many private money lenders will want to check whether applicants have prior experience investing in real estate and are equipped to manage investment risks.

If, for example, you want to fix and flip a property, private money lenders will want to check if you have experience restoring homes and then reselling them. Lack of experience DOES NOT preclude a borrower from obtaining hard money, but the stronger a borrower’s experience the better the terms they will be able to obtain.

The Applicant’s Exit Strategy

When deciding whether to lend on a particular property, the private money lender will evaluate the borrower’s exit strategy: how does the borrower plan to repay the loan? They will seek answers to questions such as what happens if the property’s value goes down, the business plan takes longer to execute than assumed, or unexpected issues arise. Is the borrower equipped to get past challenging situations such as the property needing more work than expected.

Loan-to-Value Ratio

An applicant’s loan-to-value ratio, or LTV, can be calculated by dividing the loan amount by the property’s value. Often when first lending on a property the lender will calculate the loan-to-cost ratio, which is the same calculation as the LTV but against the purchase of the property.

If the value of the property in question is $2,000,000 and the borrower wants to borrow $1,000,000, the LTV is 2,000,000/1,000,000, or 50%. Because the main determinant in a private money lender making a loan is the collateral of the loan, lenders calculate an applicant’s LTV ratio to determine the risk they will be taking by lending to them.

The LTV or LTC available to borrowers varies by lender and by property type. For experienced borrowers lenders may offer as much as 75 percent of the property’s value while most lenders will not lend more than 50% on the purchase of bare land.

The Applicant’s Income

Though a private money loan is based on the property’s value, a private money lender may want to ensure that the borrower has a stable job and earns enough to manage their loan EMIs.

Altus Capital Group is one of Northern California’s most trusted real estate lending companies. A low credit score should not affect one’s chances of qualifying for a loan. We will happily make you a loan if you meet our eligibility requirements, regardless of whether traditional lenders rejected your application. Have questions about private money lending in Northern California? Call (707) 932-5887.

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