Tyler Williamson

There’s no doubt that commercial lending practices have become more regimented since 2008, since lenders must take additional steps to protect themselves from losses by evaluating the credit worthiness of commercial borrowers. This enhanced focus on the credit worthiness of borrowers and their loan requests has in some ways restricted lending, but it represents a necessary means of stabilizing the lending landscape.

Commercial real estate loans have not been immune to these more rigorous standards for commercial lending. When it comes to commercial financing, real estate in Texas can still be financed so long as borrowers make sure to keep the 5 C’s of commercial credit in order. While many reference the 5 C’s when speaking of credit in general, they also apply to the narrower field of commercial real estate lending, since the premises are sound regardless of the context. Keep reading to learn more about the 5 C’s of commercial real estate lending and how they may impact your future requests for financing.

Character

Character is a somewhat subjective consideration, as it refers to the character of the borrower as discerned by the lender. The criteria for credit-worthy character can vary from lender to lender, but there are a few waypoints that lenders may use to assess the character of a potential borrower. Those criteria include credit history, employment or business history, past interactions with other lenders, reputation, references, and credentials.

This first C makes a good case for always meeting the terms of your financial transactions and contracts while also paying special attention to business relationships and personal interactions with others.

Capacity

Capacity is sometimes referred to with another C, cash flow. It refers to your ability to repay the loan. Lenders want to see that you have not only a plan for making the numbers add up so that your debt is repaid, but that you also have the income to realistically pay back the loan.

In the case of real estate lending, there may be some documentation required that demonstrates your net assets, your monthly and annual income, debt and liquidity statements, and other property assets that indicate you have the ability to pay the loan back in the required timeframe.

Capital

Many lenders feel more confident about lending to borrowers who are willing to put some “skin in the game,” so to speak. In other words, lenders will often require that borrowers make a significant capital investment in the venture they wish to finance. In the case of real estate transactions, you may be required to invest at least 20% of the appraised value of the property through capital. That capital can come from personal savings, profits generated from previous real estate transactions, or other business revenues.

Condition

The condition of your business or the property to be purchased is another C that lenders weigh into the decision regarding your loan request. In terms of a business loan, lenders will want to see revenue sheets, market conditions, and competitor success rates. In a real estate transaction, the condition of the property will be assessed.

For example, in a hard money loan evaluation, the property to be purchased is the collateral for the transaction. Therefore, the lender will physically inspect the property to determine its condition and attach a reasonable value to it.

Collateral

Collateral is particularly important in lending for real estate purchases because the amounts borrowed can be significant. Collateral is the physical property or assets that the borrower offers as a guarantee that the borrowed funds will be repaid. If the borrower can’t pay back the loan, the collateral can be offered as a form of repayment to the lender. In many real estate transactions, the purchased property can act as collateral, so that if the loan can’t be repaid the real estate serves as a guarantee.

If you are planning to finance your next commercial real estate purchase, make sure that you’ve considered the 5 C’s of commercial lending and how you match up against them. To learn more about the 5 C’s, contact Investor Loan Source at (409) 735-6267.

“Transitional property” is a newly coined term for something that’s been around for ages. It poses bigger risks than typical properties, but its return on investment is better.

What Qualifies as a Transitional Property?

It’s a structure or piece of land that’s changing from one type of real estate to another. Some examples include an old townhouse that’s being transformed into an office space or a hunting ground being turned into a rice field. Interestingly, one of America’s most famous amusement parks, Disney World, was once a transitional property.

Residential buildings are usually transformed into business establishments because of commercialization. The ambient noise makes the place less desirable to live in, while new customers and high foot traffic bring in opportunities for local trade.

What Makes It a Good Investment?

The most valuable part of this real estate is the land. Its value rapidly increases as the area advances out of residential and into commercial zoning. That means you can sell the lot for a higher price over time and earn back the money you received from hard money lenders faster.

You can also construct other kinds of buildings if the existing one doesn’t fit your purpose. In addition, if the residential structures in the transitional property are well-maintained, they can make suitable rental investments.

How Do You Identify Investment-Worthy Buys?

While transitional properties are a good buy, not all make an excellent investment. You have to carefully study many things about the real estate you’re purchasing, including soil type, location, and existing commercial projects in the area. An urban developer and land expert can help you go through this.

Research your property market to identify which places are targeted for revitalization or gentrification. These will likely generate the most returns.

Who Can Help You Fund Its Acquisition and Development?

Converting these types of real estate isn’t easy. It’s also a bit costly. You need a substantial amount of capital to fund a property’s acquisition, renovation, and total transformation if you’re planning to convert it into something else.

Bridge financing and hard money lending have been popular options for buyers who need quick funding to secure a deal. These loans are financed by private investors who see the value of a piece of real estate. When borrowing cash from them, be ready to explain how you’ll solve the property’s current issues and make a steady income out of it.

People with a bad credit history but considerable equity may still apply for a bridge or hard money loan. They may borrow cash for a short period until they qualify for refinancing.

How Do You Make Money?

Renting out a building is good business since it gives you a steady stream of income. However, keep in mind that the value of a transitional property eventually increases. That means you can make more money by selling or converting that piece of real estate at the right time. It’s crucial to monitor the demand for commercial properties in the area, which dictates the land’s appreciation value.

Many agents are still careful when buying and selling transitional properties, and they’d rather stay on familiar ground. But, these lands and structures are an excellent investment since they’re extremely profitable. Working with experts who know the real estate market will help you land a good deal. Contact Investor Loan Source today to secure your hard money loans in Houston.

For many engaged in real estate investing, hard money loans, also known as bridge loans, can be a helpful tool in financing transactions quickly and efficiently without the need for an extensive approval process. That’s because the loan approval is not based on the credit worthiness of the borrower, but rather the appraised value of the property the loan is being used to purchase. In other words, the property serves as a kind of collateral.

There are many reputable hard money lenders for real estate investors in Texas, but that doesn’t mean there aren’t a fair share of nefarious entities offering hard money loan opportunities. However, engaging in a hard money loan with a disreputable lender can lead to considerable strife for an investor. Therefore, it’s important that when seeking hard money loans that investors arm themselves with knowledge and learn to separate the legitimate hard money loan opportunities from the scams. Keep reading for a few tips that you can use to avoid some of the more common hard money lender scams being perpetrated today.

No Property Evaluation Required

The entire premise of a hard money loan is that the property you plan to buy with it serves as collateral for your loan amount. The loan amount itself is based on the value of the property, so you should immediately be suspicious of any hard money lender that offers approval without first evaluating the property.

This doesn’t just mean that the lender reviewed an appraisal. A legitimate lender will want to physically visit the property to perform a detailed assessment. If you can get approval over the phone for property that the lender has never seen, avoid that lender.

Upfront Fee Scams

Another sign that a hard money lender may be questionable is if there’s a request for a large upfront fee before the proper procedure is performed. Hard money loans follow a specific set of steps, and any deviation, including a sizable upfront fee, can be a sign of a scam. Fake lenders will sometimes call these upfront fees by another name such as an underwriter fee or administrative fee.

Legitimate lenders sometimes also request a fee early in the process, but those fees are generally not expensive and are usually in place to protect the lender if the borrower backs out at a later stage.

Full Funding Guarantee

Another tactic sometimes used by fake lenders is guaranteed funding of 100% of the property cost in exchange for a high fee. In other words, the lender will tell the borrower that the full cost of the property can be funded if the borrower agrees to paying a high fee. Most hard money lenders will only fund a loan equivalent to 60-70% of the appraised value of the property, so if a full funding guarantee is made contingent upon payment of a fee, you should avoid that lender.

Uncharacteristically Low Rates

It’s not unusual for hard money lenders to charge rates in excess of the bank rates for real estate loans. That’s because there is more risk inherent for the lender in a hard money loan, and because hard money loans are meant to serve as short-term funding sources for real estate investments. Therefore, when a hard money lender lures a borrower in with artificially low rates, there’s problem a scam afoot. If the rates offered by a hard money lender dip well below 10%, that should be a sign that something is wrong.

Hard money loans can provide a tremendous rule for securing funding for real estate transactions quickly, but they aren’t without risks posed by fake lenders. To learn more about how to spot and avoid hard money lending scams, contact Investor Loan Source at (409) 735-6267.

There’s always a degree of risk in any investment. However, there is a tremendous upside in that you can make great gains with a little savvy, research, knowledge, and good luck. Commercial real estate investment can offer one of the most reliable and lucrative types of real estate investment opportunities. Because of that, commercial real estate financing is readily available that can help wise investors take advantage of can’t-miss opportunities when they present themselves.

But reaping a windfall in commercial real estate involves more than just luck and available financing. There are some factors in the success of a commercial real estate investment that are within the scope of the average investor and can dramatically impact the return that is realized. Once you have commercial financing, real estate in Texas can provide you with a tremendous investment opportunity if you stack the deck in your favor. Make sure you take the following steps to maximize the success of your investment and reap the greatest rewards for your portfolio.

Follow Demand

When large national chains look to expand into new markets, one of the first things they do is look at the real estate utilized by their direct competitors. That’s why in many markets, you’ll see large box home improvement stores located right across the street from one another, or fast food franchises covering all four corners of the same intersection. The reason is simple to understand from a business perspective. Why replicate market research when your competitor has already done the work for you? Your competitor’s customers are your customers as well. When selecting a commercial investment, you can take a similar approach. Look for areas of town which are seeing booms in commercial development. If three retail strip malls have recently gone up in a one mile stretch of a bustling thoroughfare and are at capacity, there’s a good bet that the spot is well-suited for similar commercial development. Look for hot spots and find investment opportunities that are adjacent to them, but also be wary of market saturation.

Look for Multi-Use Zoning

Local zoning guidelines will limit what types of vendors or services can use your commercial space, so it’s important to try to find real estate that is zoned for multi-use. By investing in multi-use property, you’re giving yourself the widest possible tenant base and creating a wealth of options when it comes to filling your square footage with paying tenants. Diversity is a good thing when it comes to commercial real estate because it allows you to be flexible and pivot to meet the changing demand.

Examine the Norms

Again, you can learn a lot from others who are investing in commercial real estate alongside you, and it’s wise to use that knowledge when selecting and developing properties. Just as it’s a good idea to follow the demand when it comes to location, you should also find out what the norm is for space demands. For example, if there’s a lot of activity in the market for 10,000 square foot retail spaces, it wouldn’t necessarily make sense to invest in several 40,000 square foot spaces that may sit empty because they don’t meet the market need. Even the best location won’t maximize your investment if your property sits empty because it doesn’t reflect the local demand.

Use a Commercial Real Estate Broker

While many investors think they can save money by going it alone on commercial real estate selection, it’s a good idea to get an experienced commercial real estate broker involved in your investment transactions. Even if you think you have a firm handle on the market, a broker can provide you with expert advice, provide you with informed speculation about the direction the market may be going, and help with site selection. The money you spend to hire a commercial real estate broker is well worth it, so consider bringing a broker on board for your investment transactions.

By using these tips, you can create lucrative commercial real estate investments that will pay you dividends and strengthen your portfolio. To learn more about some of the things you can do to maximize your return on commercial real estate investments, contact Investor Loan Source at (409) 735-6267.

There are numerous ways to make a big profit in real estate, whether you’re planning to flip homes, purchase more rental properties, or sell rental properties to tenants. However, you need a good amount of capital to do this, so it’s important to know which loans will best meet your needs. Investment lenders in Texas offer both fixed and variable rates on investment loans, so it’s important for you to know about each type to ensure you make the smartest choice. Here’s what you need to know.

Variable vs. Fixed Rates

A fixed rate loan means that you’ll lock in an interest rate that will continue for the life of the loan. Conversely, a variable rate loan has an interest rate that adjusts over time depending on the market trends. Since a fixed rate loan has the interest calculated on the principal at the same rate, the overall payment over the life of the loan never changes. The payment on a variable rate loan will change over time because the amount of interest will change as well. There are some benefits of each type of loan that you, as an investor, should consider.

How Variable Loans Work

A variable loan rate is calculated using a well-known index like the Prime Rate or LIBOR. Typically, a variable loan will be the index rate plus an additional percentage. This additional percentage will depend on your credit score. The better the score is, the smaller the additional margin is. Riskier loans or those with a lower credit score will be give a higher margin by investment lenders. Loans that have a shorter payback term also have higher rates. The payment amount can change monthly depending on the interest rate change because the change in rate changes how much will be owed over the life of the loan.

Variable Loan Cap

It’s important to understand that there’s a cap on a variable loan amount. This is to protect borrowers regardless of how high the index rate goes. The caps are generally set at a higher amount than any borrower would want to pay, but it can be significantly lower than if the rates were to go considerably higher. So the borrower always knows the maximum they’ll have to pay, even with a variable rate.

Fixed Rate Pros and Cons

Perhaps the biggest benefit of a fixed rate loan is that you’ll always know how much your payment will be, regardless of what the market does. These standardized, monthly payments make it easy to work within your set budget without worrying about what the next payment amount might be. It’s a much safer loan for those who don’t want to gamble on market fluctuations. The downside of this type of loan is that you might pay a higher rate than a variable loan.

Variable Rate Pros and Cons

Variable rates almost always start out with a lower interest rate than a fixed rate loan does. This is because it’s a riskier loan, so lenders make it attractive by offering lower interest rates. But this can work well for a borrower or investor who plans to pay off the loan quickly. The obvious downside is the potential for rates to go higher than that of a fixed rate loan.

Deciding on a Loan

As you’ve probably learned, unique situations dictate which type of loan is best. That’s why after carefully considering both types of loans, you should contact Investor Loan Source to learn more and decide what’s best for you.

Loan-to-value ratios are an important metric for investor real estate loans in Texas and other states. LTVs determine the amount of the loan by comparing the value of the property involved. As a real estate investor, you need to be familiar with loan-to-value ratios. Here is a guide that will help you understand the basics.

What LTV Is

Loan-to-value ratios are used by investors like you and financial institutions when processing mortgages, investor loans, or refinancing to determine whether to go forward with a loan or not. The LTV can show lenders how much risk may be involved in the investment and show investors the amount of equity you will get from the involved property. Equity refers to how much of a property you own, which is expressed as a percentage on the loan. In essence, equity is the amount you would get if you sold your property minus the amount you need to spend repaying your loan.

A high loan-to-value ratio is an excellent investor loan source that can be used to define the specifications of real estate loans, mortgages, or refinancing options. LTVs are often viewed as a benchmark for how likely payments will be made. If the LTV is too high, there are ways the ratio can be lowered. The most common way to lower an LTV ratio for investor loans is to increase the down payment.

Calculating Loan-to-Value Ratios

The calculation for loan-to-value ratios is simple. You divide the amount of the loan by the purchase price of the property, then convert the sum to a percentage. You should look at how the value of a loan compares to the purchase price or appraisal value of the property. To get a better understanding of this process, use an LTV real estate calculator. This calculator lets you figure out the variables of a real estate investor loan and make note of all possible loan-to-value ratios.

What Makes a Good Loan-to-Value Ratio?

According to the calculations, the higher the LTV ratio, the more you will pay on the property, and the lower the LTV, the less you will pay. This means that a good LTV will have a lower ratio, and there will be more equity on the property. A higher LTV can still be good, though the interest rate may be higher as well. Overall, there isn’t a specific ratio that is good, per se, but there are limits and ranges you can use when considering a specific loan.

Conforming Loan-to-Value Ratios

A conforming LTV ratio is related to mortgages on personal properties, which is regulated by the Federal Housing Financing Agency. Conforming LTVs vary depending on the number of units in a residence. The ratio will be lower for non-owner-occupied properties and commercial properties (properties with more than four units).

Nonconforming Loan-to-Value Ratios

Nonconforming LTV ratios are used by private lenders who manage real estate loans online. These loans don’t conform to government guidelines. Nonconforming LTVs vary based on the investor’s credit score and the terms of the loan. Private lenders willingly take added risks by lending to investors with poor credit and high LTVs. In exchange, lenders receive higher interest rates on the loan.

Investor Loan Source can give you more insights on loan-to-value ratios. Visit us today at our Houston or El Campo, Texas locations, email us at [email protected], or call us at 409-735-6267.

Those who enter the field of real estate investment in the Lone Star State likely begin the process by seeking out an investment property lender in Texas. However, the next professional service they need after securing investment property loans is a property management service to run the day-to-day operations of their recently acquired properties.

For many who invest in real estate, hiring a property management firm provides an excellent way to let real estate provide a steady, reliable stream of income with minimal hands-on hassle. Managing your own properties can quickly evolve into a full-time job, which is why many investors choose to turn their property management tasks over to a property management firm for convenience and effectiveness. Property management firms are concerned with attracting tenants, negotiating lease terms, and keeping tenants happy. They must also make sure that the property is maintained and that when tenants depart, they leave the property in good order. However, property management isn’t a one-size-fits-all affair. Commercial real estate investors have needs that differ from those for residential real estate investors. Keep reading to learn more about a few of the key differences that distinguish commercial property management from residential property management.

Complexity of the Job

When a person enters the field of property management, he or she will most likely begin in residential property management. There’s a good reason for that. Residential property management is far less complex than commercial property management. Commercial property management involves the management of numerous details that are of little concern to residential managers, and therefore the burden of documentation is much greater. The lease agreements involved in commercial property management feature a far more complex structure as well, which requires more technical expertise to properly execute.

Tenant Types

Obviously, commercial and residential properties attract distinctly different types of tenants. Therefore, commercial property managers must have a more diverse understanding of the needs of potential tenants, how to attract them, and how to accommodate their business goals. Residential properties, even those of a multi-family nature, attract people who want to use the property as a residence. Commercial tenants will use the property primarily in the pursuit of business endeavors such as retail, food and beverage service, manufacturing, industrial, warehouse space, or other service-driven sectors.

Tenant Expenses

Residential property management features a straight-forward agreement between the tenant or tenants and the property management firm and property owner. Residential tenants typically pay a monthly rent or lease that includes a set fee. Within that rent agreement there may be pre-determined services that are offered. For example, some leases for multi-family units include not only the rental fee but utility costs as well. However, commercial leases are far more detailed. In fact, there are multiple lease structures used in commercial agreements, including triple-net, modified net, gross lease, and percentage lease agreements. For example, a triple net lease requires the tenant to pay the cost of property taxes, common area fees, and building insurance in addition to the lease fee. Percentage lease agreements require the tenant to pay a base fee plus a percentage of sales.

Property Management Responsibilities

The responsibilities of property managers for commercial properties and residential properties are quite different as well. For example, residential properties are used for residential purposes and are governed by a different set of regulations than commercial properties. As a result, residential property managers have a greater level of responsibility to quickly attend to the needs of their tenants. For example, if a residential tenant communicates that the plumbing has sprung a leak at 2 a.m., it’s incumbent upon a residential manager to provide a speedy remedy as soon as possible. Commercial property managers don’t bear the same level of responsibility because their properties are not used for residential purposes and many properties are only occupied during business hours, making the likelihood of after-hours call-outs lower.

Property management firms offer a great service to both residential and commercial property investors, as they can streamline the tenant acquisition and maintenance process significantly. However, there are different demands for the two types of property managers regarding their required expertise and responsibility. To learn more about the differences between residential and commercial property management, contact Investor Loan Service at (409) 735-6267.

Interested in getting an investment loan for some real estate in Texas? Loans differ from person to person, and the investor of your real estate loan needs to understand what your needs are before you can finalize the deal. Investor loans in Texas come with two rate term options—fixed and variable. Here is a simple guide to help you decide which term rate is best for you.

Fixed-Rate Loan

A fixed-rate on investor loans will stay the same for the whole term, no matter how much market rates change during that time. How much the payments will be will depend on what the interest rate environment is like when you take out the loan. A fixed loan will stay at whatever the interest rate was at the time of the loan was made, so you will know what you will pay, in total, over the life of the loan. Fixed rates are common for student loans, mortgages, auto loans, and unsecured personal loans.

Variable Rate Loan

With a variable rate loan, the interest rate on your loan will change every time interest rates on the market change. This means that your payments will vary the entire time the loan is in effect. The variation in the rate will continue while payments are a combination of principal and interest. Variable rates are typically attached to changes to what’s called a well-known index, which is the variable-rate the loan will be charged to. The variable includes the interest the bank will charge and the rate the charges will vary over time (usually on a monthly basis).

What Is the Best Choice for You?

Figuring out which rate is for you depends on what your situation requires and how flexible you can be regarding payments. A fixed-rate is a better choice if, for example, interests are low at the time, but are about to rise. You’ll also want a fixed loan if you prefer to know exactly what your monthly payments will be over time, or if you are going to pay the loan over a long period of time, say 10 or 20 years.

If, on the other hand, interests are declining, then you might want to consider a variable interest loan. A variable loan is also ideal if you want maximum savings, are flexible enough financially to make higher monthly payments, or you’re going to pay the loan off in a short period of time (10 years or less). Talking to lenders for a real estate investor can be helpful in making a final decision.

If you would like to find out more about interest rates for loans, contact Investor Loan Source via website, email, or phone today.

If you’re considering real estate investment, there’s a tool that could be helpful in bringing your investment dreams to fruition without extending your credit or hurting your bottom line. That investment tool is known as a hard money loan. Hard money lending in San Antonio can provide investors with quick access to funds for investment without the long, drawn out application period of traditional loans. Hard money lenders help connect real estate investors with the funding they need to take advantage of a dynamic market. They use the value of the purchased property as collateral instead of relying on the borrower’s credit alone.

Hard money loans are perfect for many real estate investment purchases because of their speed of processing and easy accessibility. In fact, they are tailor-made for a few specific circumstances that are common among investors who play the real estate market. Keep reading to learn more about top situations in which hard money loans can help buyers in need of funding.

When Time Is Critical

In real estate investment, those who aren’t ready to act in the moment often find themselves missing out on potentially lucrative real estate deals. A wise investor should have constant access to a sizable amount of funding in order to successfully play the real estate market and outbid competitors for the premier investment properties. That’s one reason hard money loans can be helpful to those in the business. It can provide quick funding that allows investors to seize opportunities to buy high quality properties. While those who apply for a loan from a traditional banking source are waiting for their applications to be processed, hard money borrowers can take action and close on a purchase in short order.

When Credit Is Damaged or Overextended

With traditional financing, your ability to borrow is only as strong as your credit history. That’s because traditional lenders base their decision to loan you money based on the way you’ve handled previous loans as well as your current debt obligations. That helps them assess the risk of loaning funds to you. If you have damaged credit, your chances of getting a loan through a traditional source are significantly lower than they are for someone with stellar credit. However, hard money loans don’t rely on your credit score to make a determination about loaning money to you. Instead, the value of the property you are purchasing is the critical concern of the lender. In other words, the property you are purchasing will serve as collateral on the loan. Therefore, damaged credit doesn’t matter nearly as much, which increases your chance of getting a hard money loan even when you’re not eligible for a traditional loan.

Funding Capital Improvements

Hard money loans can also be helpful in situations that involve extensive remodeling of a property that you already own. For example, if you purchased an investment property only to discover that the renovations will be far more extensive than you anticipated, you could run out of funding. In that case, you’d still have to pay back the traditional loan you took on the property without the benefit of revenue generated from it. However, you could also secure a hard money loan quickly that would provide the funding to allow you to move forward with your renovation so that you could pay back both principals in a timely and efficient manner.

Hard money loans can provide real estate investors with an excellent tool for seizing opportunities and creating profit-generating real estate projects. To learn more about the ways that hard money loans can benefit real estate investors, contact Investor Loan Source at (409) 735-6267.

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.

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.