Loan Options For Real Estate Investors Who Can’t Borrow From A Bank


Measuring Risk Against Return

With the rapid bump in the real estate market, many individuals today are looking for loans they can pay with time. These loans include options to invest in the real estate market and also make sure that there is an opportunity for building one’s home over time.

Personal loans can be hard to generate for individuals with poor credit scores. Banks are more particular than ever at handing out loans today, which is why you should consider other alternatives. In this article, we mention a few of these alternatives to help you get a better grasp of the opportunities available to you and your organization.

Fix-And-Flip Loans

While being a landlord in the real estate industry comes with its perks, there are also multiple headaches involved in the process. Some investors find fixing and flipping houses more lucrative than actually owning real estate properties for longer durations and handing them over to tenants.

Fixing and flipping allow real estate investors to receive their profit in a lump sum when they sell their home, rather than waiting for minimal income through rent each month.

Fix-and-flip loans are hard money loans, which are secured through the property itself. Hard money lenders can be trusted for such loans, but certain real estate crowdfunding platforms offer these loans as well. The upside to using a hard money loan to finance your home is that it may soon help you qualify for more conventional loans.

However, fix-and-flip loans aren’t suitable for every real estate investor today. These loans only prioritize one type of investment and ignore other investments in real estate.

Borrowing From Friends Or Family

This really should be your last resort if things go south, that is. Borrowing from friends and family can be tricky, which is why personal finance blogger Luke Landes mentions that it should only be contemplated when other options fail.

The option is tricky because there aren’t any regulations and obligations attached with the loan. Even if someone from your close family does float you a loan, what is there to say that they might not want it back after a couple of months? Just when you won’t be able to pay them back without jeopardizing all your investments!

Financial Planner Mary Beth Storjohann suggests that some headway can be made with loans from friends and family if you are able to create a written plan with all parameters jotted down. These parameters include time frame, interest rate and repayment structure, among many other things. The lender should also charge a nominal interest rate to force an obligation on the borrower.

Access Capital Through Your Publicly Traded Stock

You’d be interested to know that public stocks are considered an acceptable form of collateral today. The public stocks you own can be used as collateral to get a cash loan. Real estate investors who own public stocks can hand them over to stock loan providers and avail a cash loan in return.

Selling off your stocks might sound viable, but what if the stocks shoot up and you aren’t able to buy them back? The best outcome for businesses and individual investors alike is to trade their public stocks and use them as collateral for a cash loan.

Non-Recourse Loan

Unlike centralized debts, which force obligation on you, a public stock loan against your stock holdings is considered a non-recourse loan. A non-recourse loan is a secured form of debt that is anchored through the pledge or the provision of collateral, typically stocks or real estate property.

However, the borrower is not to be considered liable for the loan and holds no obligation. If the borrower ends up defaulting, the lender can sell the collateral. But, if the agreed collateral sells for less than the total value of the debt, then the borrower has no obligation to pay off the remaining amount.

The recovery amount is limited only to the collateral and how much it sells for in the open market. Loans given against public stocks allow real estate investors to get the financing they need to solidify their plans.

Individuals can also get a Nifty loan to meet immediate real estate requirements. Small renovations can be managed through a Nifty loan. These loans ensure that individuals get the results they require and are able to invest/spend money on real estate.

We hope you find the options above helpful and can now invest in your real estate ideas. Real Estate investments and loans shouldn’t scare you away. In fact, with the feasibility of the options mentioned here, you should be able to invest in real estate in a manner that you want.

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Preeti Shah
Preeti Shah is a person who loves checking out different styles and designs of houses. She took interior designing in college and is practicing in the field of home improvement for five years now. In her spare time, she is usually searching the web for interesting and fascinating home designs.


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