One caveat: Many crowdfunded real estate investment platforms only finance a portion of a loan, assume about 90%. This is so you, the builder, have some “skin in the game.” But it also means you need to come up with the additional 10% to completely fund your deal. While this 10% typically comes directly from you, the borrower, some developers parlay their private money relationships into a form of equity on their projects to achieve maximum scale. The point is you don’t just want, but need , a diverse capital stack to scale your business. When you’re relying on a direct lender for the majority of your funding, it gives you more opportunities to make decisions about what is most important to you and your business goals. FLEXIBILITY IN FUNDING You might be thinking that working with a corporation for funding is going to mean really strict terms and no flexibility. Not so. While we can’t speak for every lender— some of them might have strict terms—many direct lenders offer real estate entrepreneurs flexibility in their loan structure. True, there may be more paperwork involved than dealing with a private money lender, but you also get more support and consistency. SLOW LENDERS KILL GOOD DEALS Banks can take 45 to 60 days to close a deal. If your rich uncle is on vacation, he might not get back to you for a week. Good online direct lenders understand how important speed is to your livelihood and your business. When you apply for funding, don’t let them ask all the questions. Here are some you should be asking: • How quickly can you commit to funding? • How much financing am I preapproved for? • How quickly can you close? • What are your requirements for me as a borrower? • What are your underwriting requirements? And if a lender doesn’t get back to you quickly after you apply for funding, move on. If they’re slow to even find out what you need, they’re probably not going to get any faster during the life of the loan.
Fund That Flip is proud to sponsor NHRA drag-racing team MBR.
PEOPLE-FIRST LENDING The next time you’re looking for funding, ask yourself: • When was the last time your lender visited your job site? • Does your current lender (or rich uncle) know your business goals? • Can you easily get in touch with your lender via email, text, or a call? • How quickly does your lender get back to you? • Does your lender explain the benefits of various exit strategies or establishing an LLC for your business? If you answered “no” to any of these, then you’re not working with a lender that puts your business first. Your business is just as important as the lender’s business. We’re all here to make money, but it can’t be at the expense of each other. Builders and redevelopers practically expect to receive less-than-average service from their lenders, but there are many lending platforms looking to change that. Find one that’s interested in helping your business grow, not just make money from your efforts. •
Lauren Hoffman-Noark is a marketing strategist and content creator with more than 15 years of experience. She leads content development at Fund That Flip, focusing on providing information and insights to its entrepreneur and investor clients. She previously worked in the insurance, CPG, and retail industries. Hoffman-Noark is also a long-term renter, residing in a single-family flipped house in the Cleveland, Ohio, suburbs.
18 | think realty magazine :: june 2022 :: SPECIAL LENDING EDITION
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