Private Lenders versus Bank Financing, Which is Better for Your Real Estate Investments?When you are considering the purchase of an investment property, there are two primary options that you will have in terms of financing. These include going the route of a traditional bank or lender, or instead using a private lender. Because these two types of funding can differ, one may be better than the other for you, depending on the type and the amount of property you’re purchasing.

For example, in most cases, a traditional bank or lender will charge lower interest rates, as well as lower loan origination fees. However, while you may be able to get a more favorable rate – and in turn, a lower monthly payment amount – traditional lenders will also typically require that you have good credit, and that you are not over-extended on your overall borrowing.

A private lender, on the other hand, will look more at the property that is being financed, rather than at the investor’s personal credit and other financials. With that in mind, private lenders will usually cap their loans at 60 or 65 percent of the loan to value ratio.

There is also a time factor involved when considering which type of lender to go with. In this case, banks and other types of traditional lending institutions can oftentimes get a loan closed within 30 to 45 days. Some private lenders may also take a few weeks to complete your loan, while others may be able to get your loan closed within just a couple of days.

Overall, if you have a property or a deal that might be more challenging, a private lender may be the way to go. If, however, the deal is fairly simple and straightforward – and your credit is good – then you may find that going with a bank or traditional lender could be the better option.

Once you have purchased a property, you will also need to allocate a certain amount of time for finding and screening tenants, collecting rent, and taking care of any maintenance that is needed. In doing so, it can often be beneficial to work with a property manager who can handle all of these details for you. For more information on how a property manager can benefit you and your real estate investments, Contact Us.