Top Private Equity Strategies Investors Should Know

Review financial documents

Private equity has long been a strong investment opportunity and has shown little signs of slowing down. This type of investing allows those looking to invest to purchase shares of private companies. There are a number of strategies that can be used by investors that are looking for private equity investment. Here are some of the top private equity investment strategies that investors should know.

Venture Capital

Every year there are a large number of new companies forming. Many of these companies need investment but have little or no record of profitability. While they may be new and have a short history, new industries continue to pop up and some of these companies become extremely successful. Finding the right one of these companies could allow you to easily invest and escape in a short period of time with a large profit. Investors that are able to successfully determine which of these new companies will grow in the coming years will see the highest profits.

Real Estate

Real estate has long been a popular investment strategy and continues to be today. There are four primary strategies used for private equity real estate investment: core, core plus, value-added, and opportunistic. Core real estate investments offer a low, predictable return but are low risk. Core plus investments will require some form of value-added and, therefore, feature moderate risk and reward. Value-added properties will feature medium to high risk and reward, depending on which property you purchase. The idea is to improve the property and sell it for a profit. Opportunistic properties are the highest risk as they need the most amount of enhancements before being sold for a profit.

Growth Capital

Venture capital investments can be very profitable, but it can be difficult to determine if a new company will be successful. A safer bet is growth capital investments. These companies are mature with proven business models. This allows you to make a more analysis-based decision on your investment. Most of these companies are looking for minority capital for the purpose of expanding or restructuring operations, entering new markets, or financing a major acquisition. These companies have been successful and have some capital but need some more investment to achieve certain goals.

Investment opportunities

Mezzanine Financing

Another option instead of growth capital for established companies is mezzanine financing. This type of financing is used to finance the expansion of a company. The companies take on debt capital and will give the lender the ability to take on ownership or equity interest if the loan isn’t repaid in a timely manner or in full. An advantage of this type of investment is that these companies are well-established with a successful product or reputation in the industry. They will have a history of profitability and a viable expansion plan. Many established companies use this method of raising capital as they won’t have to give up much equity ownership if they are able to repay their loans. However, this type of investment forces the lender to take on greater risk as the financing isn’t collateralized.

There are a number of ways that an investor can invest in private equity. The right type of strategy depends on how much risk they are willing to take on and the level of return they want to expect. These are some of the top strategies that private equity investors should know. Contact Investor Loan Source if you’re looking for private real estate investors in Texas.

Financing Investment Properties: A Guide for Newbies

Investing in House

If you’ve dreamed of investing in real estate in Texas but hesitate to jump in because you’re not sure about financing, continue reading. Real estate investing is one of the safest pathways to financial freedom and long-term wealth building. Don’t let a lack of funding cause you to abandon the dream. By following this guide, you’ll learn a few basics designed to help new investors fund their real estate projects.

Stash That Cash

If you currently own the home you live in, unless you had down payment assistance, you brought cash to the closing table. Real estate investing also requires cash. Stockpiling cash should be the goal of any new real investor. The more money you put away, the less you need to borrow when you start talking to lenders for real estate investors. Also, even though you may be able to finance your projects, you’ll still need cash for renovations. Cash also gives you more options when looking for future investments. If you can make cash offers or have larger cash down payment than other investors, you can often beat out your competitors.

Credit Scores Matter

While your credit score won’t bear as much weight for investment financing as it did when you applied for the mortgage on your home, your credit rating still matters. Several factors influence financing terms on investment properties. For example, lenders look at the loan-to-value (LTV) ratio. Because investors pose a higher default risk than homeowners, investment lenders mitigate their risk by requiring lower LTVs. When you meet with investment lenders in Texas, you may find that they look more at the collateral than your borrower profile. That doesn’t mean you can ignore your credit score. A credit score is still an important part of the loan approval process.

Consider Short-Term Loans

Traditional home loans usually come with terms of 15 or 30 years. That’s why big banks and mortgage lenders aren’t always the best financing option for investors. You want financing that helps you secure a property, renovate it, and sell it. Private investors specialize in short term loans. The terms average around 12 months, but you can extend the loan period for 2-5 years. Most short-term loans require either interest-only payments or interest and principal. You’ll then have a balloon payment at the end of the loan term.

Calculating Loan Amount

Ask Family and Friends

Also known as private money lenders, individual investors are another excellent source of funding for newbie real estate investors. Look at your network of family and friends. You likely know someone who has money they’d like to invest. You can often find private investors among your co-workers. Participate in local real estate investing meetups. You may find a partner there as well. The key to private money is making sure you put together a great presentation for your project. Private lenders want to know they’re putting their money into a project with a well-thought-out plan.

Real estate investing doesn’t have to be intimidating. If you’re ready to take the next step and seek financing for your investment projects, you’ll want to work with the experts at Investor Loan Source. Start the application process at https://ils.cash/apply/.

Private Money Lenders: A Dream for Real Estate Investors

Loan

Every real estate investor knows that without money, there’s no deal. They also know banks and mortgage companies aren’t always the best solution for funding projects. If you’d rather fund real estate investments without using traditional financing, consider hard money lending. Here are a few reasons why private money lenders are often considered a dream for real estate investors.

Money in Your Hands Faster

If you’ve ever applied for a traditional real estate loan, you know how long it can take. Time is of the essence for real estate investors. Without fast funding, you run the risk of losing out on lucrative deals. Private money lenders understand the importance of buying, rehabbing, and selling a property quickly. Most private lenders can fund your project in a few days. Some can put money in your hands in a matter of hours.

Less Bureaucratic Red Tape

Traditional lenders require what feels like reams of documentation before they’ll close on a loan. Often it’s the documentation that holds up a loan. You lose time, and as mentioned above, time isn’t your friend when looking for good real estate deals. It’s not only time, but the loan process with a bank or mortgage company can also be invasive. These lenders want to know every detail of your past, present, and future financial life. Private money lenders, on the other hand, aren’t so concerned with your private life. Private money loans are usually asset-based. If you have collateral that qualifies, you’ll get the loan.

No Worries about Hidden Fees

When you closed on your first real estate loan, did you really understand what you signed up to pay? Most people understand they’re paying for the property, interest on the loan, and certain costs to close on the loan. What they don’t understand are the fees added on by the lender. Often, there are multiple fees obscured in the loan documents. When you’re at the closing table, you’re fed document after document. The closing specialist does explain the documents you’re signing but it all happens quickly. You may not realize what fees you’ve agreed to pay until you take time later to read the documents you’ve signed. Private money lenders who specialize in investor loans, don’t hide fees. You’ll know upfront what you’re borrowing and what you’re required to pay back.

More Leniency with Credit Scores

Traditional lenders focus on credit scores. If you have a bad credit score, foreclosure, or bankruptcy on your credit record, you may have difficulty getting approved for a loan. Investors applying for hard money loans in San Antonio  generally experience a more lenient credit scoring process. Private lenders do look at credit, however, they’re often more receptive to investors with lower credit scores. If you’re applying for a conventional mortgage, you’ll need a credit score of 640 or higher. Private lenders typically require a credit score over 550.

Lender

Unlimited Borrowing Opportunities

Most banks and other traditional lenders limit the number of mortgages to between 4 and 10 per borrower. For a serious real estate investor, this limitation can prevent any substantial growth. Your funding opportunities with a private money lender are generally more generous. If you can prove you’re a good risk and have qualified collateral, there isn’t a limitation on the number of hard money loans you can apply for.

We’ve covered just a few reasons why private money lenders can help a real estate investor’s dreams come true. If you’re looking for reliable and fast funding for your real estate project, contact Investor Loan Source. We understand real estate investing and know how to get a project funded with minimal paperwork and inconvenience to you.

Mistakes to Avoid When Choosing a Real Estate Investment Loan

Home Investment

Thanks to real estate shows on television like Flip this House and Flip or Flop, more people are interested in real estate investing. While there’s money to made flipping houses and renovating properties, going into the process expecting to make a huge profit off your first flip isn’t realistic. Successful real estate investors build their investments over time by achieving modest returns on their investment. Keep reading to more about common mistakes and how to avoid them achieve long-term success.

Mistake #1 – Not Running the Numbers

The reality is that not every home is a good investment even if the price seems right. Before you take out a real estate loan, you need to run the numbers and determine your profit margin. How much do you need to put into the house? How long can the house stay on the market for you to still make the profit you want? Many first-time investors have ended up losing money on their investment because they didn’t prepare ahead of time.

Mistake #2 – Not Having Enough Cash Reserves

Even when you run the numbers, there are still times when things pop up. In fact, since most investment homes are foreclosures or short sales, it’s not uncommon to find maintenance issues that need to be fixed. When you take out a real estate investment loan in Texas, set aside part of that money for those expenses that come up like replacing an HVAC unit or water heater.

Mistake #3 – Listening to the Wrong Opinions

Every one has an opinion about everything, but that doesn’t mean those opinions are right. People are well meaning but that doesn’t mean you need to listen to their thoughts about your investment. Instead, surround yourself with people in the industry who have experience. Investment loans aren’t the same as traditional mortgage loans. Taking advice from the wrong people could cost you money.

Investment Loan

Mistake #4 – Not Researching Your Lending Options

Many first-time house flippers start by applying for a loan from their bank or a traditional mortgage company. Soon after applying, they learn that it’s not as easy as they thought to get a loan. That’s because conventional lenders aren’t as invested in investment real estate. They see these transactions as risky, and if they do loan you the money to purchase the property, there might be restrictions about how long you have to live in the house before selling or you might be required to put down a large down payment.

Real estate investor loans in Texas operate differently. They are designed specifically for flippers, renovators, etc. The terms of the loan are more relaxed, the funding is quicker, and approval rates higher.

Real estate investing offers the opportunity for sustainable growth and financial freedom, but you have to start small and with the right information. You need people backing your venture who understand the unique needs and challenges that house flippers face. If you’re ready to find a real estate loan in Texas for your first project (or your second, third, fourth, etc.),  visit Investor Loan Source at https://ils.cash and start the application process today!

Understanding How Hard Money Loans Help in Flipping Houses

Lender

Investors are making money flipping houses and securing their financial future. House flipping is the process of buying homes in poor to fair condition, renovating them, and quickly putting them back on the market to sell for a greater return. If you’re interested in flipping real estate but don’t have the cash to invest upfront, you need a lender or private investor.

The obstacles flippers run into is not being able to find financing. Traditional lenders aren’t eager to lend to house flippers, which is why many first-time and seasoned flippers turn to hard money lending.

Hard money loans make purchasing investment properties easier, but most newbie investors haven’t heard of these helpful products. Keep reading to learn more about how these loans work and why they could help you achieve your real estate investment goals.

What Are Hard Money Real Estate Loans?

At first glance, hard money lending isn’t much different than any other real estate loan. Flippers apply for financing and repay the loan over the course of a set period. However, hard money loans have different requirements, and most importantly, benefits.

Here are some of the differences:

  • Traditional loans require the home to secure the loan.
  • Hard money lenders let you use other real estate as collateral.
  • You don’t have to collateral that equals the full value of the property.
  • Lenders of hard money loans have access to the homes equity in case you don’t pay back the loan.
Renovating House

Reasons to Use Hard Money Lending for Entering the Real Estate Market

There are several reasons to choose hard money lenders for flipping homes, especially if you have any of the following obstacles.

  • Credit problems: Not everyone has stellar credit, but why should your credit score hold you back from making money? It shouldn’t and hard money loan products consider other factors, not just your credit score. These lenders work with individuals, not credit scores.
  • Proof of income: If you’re self-employed, make too little money, or have other issues that affect income eligibility requirements for traditional loans, you’ll have a better chance of securing financing working with hard money companies. These companies don’t require proof of income.
  • Property condition: Banks want to finance homes that are in good condition because it’s less risky for them. However, this doesn’t help house flippers. In fact, it’s a huge obstacle. It’s the reason many investors, even those with great credit and proof of income, choose hard money lenders. These lenders know investment properties need work and don’t hold it against you when applying for a loan.
  • Time restraints: Anyone who has ever flipped a home knows that timing is everything. To make the most money from your investment, you need to get in and out fast. That means you don’t have weeks or months to wait for loan approval from a regular bank. You need fast financing, which is exactly what you get with hard money products. The approval and funding process is done most of the time within 7-14 business days.

Are you ready to start flipping homes with hard money loan financing? Learn more about the process and find the best hard money lending in Houston. Contact the hard money pros at Investor Loan Source at https://ils.cash and apply online.

A Beginner’s Guide to Private Real Estate Fund Investing

Real Estate

Are you searching for investment opportunities that offer high returns in this volatile market? Real estate private investors know that real estate offers the finest rewards. These kind of investments are often handled by a third-party investment manager or sponsor. If this is something you’re interested in learning more about, keep reading for a quick overview of the benefits of private real estate investors.

Benefit #1 – Experience

Investment management is a full-time job done by a person who has real estate investing experience. They have an established operation that handles all the daily tasks and a team of professionals working with them all for your benefit.

Benefit #2 – Cost

Are you worried about how much your investment is going to cost you? Some financial products don’t spell out the fees or interest upfront. With real estate investing, you know the investment cost up front. You’ll find the costs listed in the contract you sign. The costs outlined in the contract include things, such as manager fees and carried interest.

Benefit #3 – Variety

What type of investor are you? Are you a small investor? Or, are you interested in a variety of asset sizes? Examples of private real estate products include:

  • Senior loans
  • Preferred equity
  • LP equity
  • Mezzanine debt

Benefit #4 – Fewer Distractions

Investing requires your complete attention. Managing day-to-day tasks gets in the way of this, which is why many turn to private real estate investors. When you have many properties you’re managing, you need someone who has the skills and experience to take over the operational management tasks.

Real Estate Agent

Other Considerations about the Best Private Real Estate Investors

Once you decide to seek out a sponsor, take these points into consideration:

  • Consider the vitality of the actual investment. Is it a good investment? Is it worth hiring a third party to manage? What is the return on the cost?
  • Dissect the sponsor’s strategy for maximizing your return. There is much to be considered when investing in real estate. How much do you intend to sell the properties for? Do you plan to finance at a lower rate? Compare your strategy with those of the sponsor to make sure you are on the same page.
  • For a single project, the legal wording in a fund agreement might be looser. While you might be able to get by with this for one or two small projects, as you add more projects to your portfolio, you need a tight fund agreement to avoid potential problems.

Private real estate funds are a great way for people to diversify their financial holdings and portfolios. However, that doesn’t mean you shouldn’t do your research when considering this type of investment. Choosing the right fund and private investors in real estate means the difference between a financial win and a staggering financial loss.

To begin the process, start with securing the property with a lending product that gives you the wiggle room you need to be successful with your project. At Investor Loan Source, first investors and seasoned pros have access to lending programs that make real estate investing easy and more accessible for all people. To learn more about private real estate investors in Texas, visit the Investor Loan Source website at https://ils.cash.

Tips for Choosing the Right Hard Money Lender

Piggy Bank

Hard money loans are preferred among real estate investors because of their quick turnaround time. However, not all hard money investment lenders in Texas are the same. To avoid getting talked into a bad deal, check out these tips for choosing the best hard money lender.

Choose a Firm that Specializes in Hard Money Lending

This might seem like a no-brainer, but many people confuse private investment lenders with hard money lenders. Hard money loans require the expertise of a hard money specialist to make sure all servicing, origination, and other requirements are completed correctly. While on the surface these loans look simple, they’re actually rather complex and must be structured well to make sure the lending process is facilitated well.

Select a Local Investment Property Lender

Hard money lenders are concerned about how much equity is in the property because the equity is their protective measure against default. Therefore, most hard money lenders are going to want to inspect the property before issuing a loan. Choosing a local lender makes the inspection process easier.

Insist on Transparency

Don’t sign paperwork blind and never sign a contract you haven’t read fully. Some hard money lending companies don’t abide by standard business practices. They may coerce you into a bad deal by promoting teaser rates. Insisting on transparency every step of the process ensures you have a better handle on the situation and know the exact terms of the deal.

Know Your Hard Money Needs

There are many types of real estate investors. What type are you? Are you a house flipper searching for a property to buy cheap, fix up, and sell for a profit? Are you interested in buying several homes and flipping them at the same time? Perhaps you’re interested in buying homes cheap and renting them. You might not be interested in residential properties at all, but are more interested in commercial properties. Knowing the type of investor you are helps you find the best investment lenders and the cheapest rates. Some hard money lenders only provide loans for residential real estate, whereas other lenders have numerous programs for all kinds of investment opportunities.  

Giving Loan

Lender vs. Broker

Not all investment lenders are the same, especially when it comes to hard money lending. Ideally, you want to work with a local lender. Doing so ensures you get personalized customer service and you always knows who has your loan. Some hard money lenders aren’t lenders at all, but they’re actually brokers and take your information then work to find an actual lender to help you get the money you need. While there’s nothing wrong with this system, not every investor wants to work with brokers. Decide what type of investor you are in this regard and choose accordingly.

How Fast Do You Need Funding?

When choosing a lender, this is an important question to ask yourself. Hard money lending goes faster than traditional bank loans, but each lender works within different timeframes. Most hard money lenders process loans within 7-14 business days. However, there are some who have the ability to process loans in as little as 5 days. Knowing how fast you need your money will help you make the best choice.

Are you looking for a hard money lender in Texas? Call or visit Investor Loan Source today to learn more about hard money loans for real estate investors in the Houston market.

Tips to Qualify for a Hard Money Loan

Two People Shaking Hands in Office

Hard money loans in Texas are a little bit different from regular bank loans. Those who have never tried to obtain one of these loans before may be a little unclear about what they need to qualify. Compared to traditional loans, there are fewer requirements. These loans are asset-based meaning the lender will mostly look at the value of the property and the borrowers’ equity in the property. The larger the equity, the safer the loan will be for the lender and the more likely they will be to approve the borrower. Lenders also look at the financial strength of the borrower. They want to be sure that you will have the money needed to make monthly loan payments and cover all the other responsibilities of caring for the property. Keep reading to learn more about what lenders look for in a loan application and how you can improve your odds of getting approved.

Down Payment and Equity

The main thing you’ll need to qualify for a hard money loan is the necessary down payment or equity in the property. This will serve as collateral for the loan. For residential properties, the minimum amount ranges between 25 and 30 percent. The minimum increases to 30 to 40 percent for commercial properties. You will have a better chance of qualifying for hard money loans in Houston if you have a larger down payment. The more money the borrower has invested in the property, the less risk for the lender. In some cases, you may be able to use multiple properties to secure a loan. This process is known as cross-collateralizing.

Overall Financial Strength and Cash Reserves

The next thing you will need to have to secure a hard money loan is enough cash reserves to make monthly loan payments and holding costs. The holding costs usually include taxes, insurance, HOA payments, and other costs for property maintenance. The more cash you have to show the lender, the better your chances of approval will be. If you do not have any cash reserves, you will have a hard time obtaining a hard money loan. In certain cases, the lender may be able to increase the amount of the loan and hold back the funds of the borrower to cover the holding costs. This way, the borrower can still get the loan, and the lender will have more assurance that essential payments are being made. 

Couple Speaking with Realtor

Real Estate Experience and an Exit Strategy

Additionally, your lender will want to know that you have experience in real estate. Someone who has been investing in real estate for years and years will have an easier time qualifying for a hard money loan than someone who is trying to fund their very first house flipping project. They will also want to know about the details of the property and the project, especially if you don’t have a lot of experience in real estate. You will need to prepare an exit strategy for the property and how you plan to repay the loan as well.

For more information about hard money loans or to apply for one today, contact us at Investor Loan Source.

Signs of a Hard Money Loan Scam

Couple Talking to Banker at the Bank

Hard money loans have become a common tool used by real estate investors who need lump sums of money quickly to seize profitable opportunities before they slip away. Unlike traditional lending sources which require a much longer timeframe before releasing funds, hard money loans can get money in the hands of investors quickly with little risk since the loan uses the property as collateral.

While most providers of hard money loans in Houston, TX, are legitimate private parties willing to invest in property-backed lending opportunities, there are some loan providers who run fraudulent schemes on borrowers. Hard money lenders aren’t held to the same regulatory standards as traditional lenders, and therefore the industry features loopholes which can be exploited by unscrupulous lenders. Fortunately, it’s not hard to spot scammers in many cases if you know what to look for. Keep reading to learn how to get hard money loans in Texas without falling into a scam.

Shady Rate Structure

A sure sign of a scammer is a lack of transparency when it comes to loan rates for hard money. Rates should be honest and fair. Though you will usually pay higher interest rates on hard money loans when compared to traditional funding sources, rates shouldn’t be exorbitant. Rates above 18 percent should be a red flag that something may be awry. Likewise, if the lender gives you a rate that seems exceedingly low, such as below 10 percent, something foul may be afoot as well. Lenders who give you a low rate upfront may later come back with exorbitant fees that can drive prices higher. You’ll also want to avoid any lenders who won’t present you with a clear-cut APR. If they won’t provide you with that basic information in a forthright manner, move on to another option. 

Abbreviated Application Process 

One of the benefits of hard money loans is that the application process is streamlined so that lenders can provide funds to real estate investors quickly and efficiently. That doesn’t mean that there shouldn’t still be an application process that requires you to submit key details and sign a contract. If a lender fails to require you to apply before providing you with funding, there’s a chance that there are nefarious ends in store for you. The process should include filling out forms and allowing the lender to inspect the property. It usually takes several days. If the lender you’re considering doesn’t want to see the property and requires no up-front paperwork, there could be a fraud in the making. Also, if a lender claims to provide funds for anything, it could indicate bad intentions.

Person Looking up Lenders on Their Computer

Phantom Lenders

A reputable lender is easy to find by using internet search engines. Most good hard money lenders have been around long enough to build a successful business under a recognizable name. If you search for a lender online and can find nothing about the company, it may be a sign of a scammer. Many lending scammers operate a short time under one name, then shutter the operation and open another under a new name to prevent former bilked customers and authorities from catching up to them. A lender with good business practices and ethical lending standards will want its name to be known. A company that remains in the shadows is there for a reason.

If you’re considering hard money lending in Texas, be sure to use this advice to avoid potential scams that can submarine your real estate transactions and create frustration. To learn more about the characteristics that separate scammers from legitimate hard money lenders, visit Investor Loan Source at https://ils.cash/.

Understanding How a Hard Money Loan Works With Bad Credit

Couple with Bad Credit

If you have bad credit, finding financial products to purchase a home isn’t always easy. It’s even harder when you’re a real estate investor and need a loan to purchase another property. When you’ve had properties foreclosed on or you’ve been late with payments, this brings your credit score down and makes it hard to find lenders willing to work with you. However, there are options. Continue reading to learn more about hard money investor loans in Texas and how they could benefit your situation.

What Is a Hard Money Loan?

For those new to the hard money lending concept, you might not have any idea what this program is. Hard money loans are ideal for people with bad credit because lenders of investor real estate loans in Texas aren’t concerned with your credit score. What these lenders are most interested in is the value of the property. Hard money loans are considered collateral-securing loans. If something happens and you can’t pay back the loan, the lender simply takes possession of the property and makes their money back this way.

Hard money loans are short-term financial products. They were designed for real estate investors, not people interested in 30-year mortgages. Unfortunately, when investors have deals that fall flat and they can’t pay the mortgage, it leaves them with a bad credit score and foreclosed properties. It also makes them ineligible for bad credit lending programs reserved for traditional home loans. When you’re an investor and you have less-than-perfect credit, finding lenders for real estate investors is hard, which is why hard money loans are the perfect solution.

The Benefits of Hard Money Loans for Bad Credit

The #1 benefit is that you’re more likely to be approved for a loan. As mentioned previously, these loans are collateral-securing loans and not credit-based. If the property has enough value and equity, securing a loan is easier.

Hard money loans offer bad credit borrowers the following benefits:

  • Fast closing – Hard money loans close faster than traditional loans, which means you can start making repairs or doing what’s needed to get the property back on the market and sold ASAP.
  • Available for all types of properties – Hard money loans are real estate investor loans for residential and commercial properties. They can even be use for land purchases.
  • Flexibility – Unlike traditional loans, these hard money loans look at each situation individually. Because you’re dealing with a smaller company, you don’t have to put up with the strict policies banks and other mortgage companies have in place. 

Using Credit Card

Is a Hard Money Loan Right for You?

Hard money loans are an attractive option for investors with past financial challenges and bad credit scores. But are they right for everyone? If you’re considering this type of loan, keep in mind that these loans are short-term. Hard money lenders want to be paid back within 6 months – 5 years, depending on the loan terms. Also, because these are short-term financial products, the interest rates are higher. Paying the loan off as quickly as possible saves you the most money.

To learn more about how hard money loans benefit those with bad credit, contact Investor Loan Source today!