“One of the biggest rookie mistakes is to focus on rates. Keep your perspective on the entire financing package. Rates, leverage, reserves, fees, investment goal and exit strategy are all part of that package. CONSIDERATIONS FOR SELECTING A CAPITAL PARTNER
INVESTMENT STRATEGIES Financing solutions are not one-size-fits-all. Each property may have a different strategy, therefore, be clear on your intention with the asset and determine the short or long-term objective. Having a clear exit strategy in advance will help you find the right financing solution for any strategy: FIX AND FLIP – When you find a good deal, you have move quickly to acquire it. Know your market and the housing trends that are selling. In today’s market, you can be optimistic that you can reap returns, whether by way of cosmetic updates or complete transformations. REHAB FINANCING – Preserve your cash by including the cost of construction and rehab into your loan. You will receive draw payments at various milestones to cover these expenses. FIX AND HOLD – Real estate as an asset class continues to generate attractive returns. Demand for rental properties is high, allowing you to benefit from both monthly cash flow as well as property appreciation. BRIDGE-TO-CONVENTIONAL FINANCING – Oftentimes a short-term bridge loan will enable you time to improve the property, or generate monthly-cash flow required to refinance into a low-interest conventional loan. CROSS-COLLATERALIZATION – If you have multiple properties, you can leverage the collateral of all, into one private money loan. This can be especially appealing if you want to use the combined equity in your properties to more easily purchase additional ones. As the real estate market anxiously attempts to figure out what the future holds, now is the ideal time to focus on managing and potentially re-tooling the financial aspects of your business — which includes building relationships with trusted financial partners to help ensure your short and long-term growth.
Circumstances such as the recent pandemic clearly illustrated the imperative of conducting due diligence when choosing to align with a capital partner. It is important not to think merely transactional – getting a good deal on one property – but rather focus objectively on who will be your capital partner as you grow and change, and as market dynamics shift. CAPACITY AND ACCESS TO CAPITAL – At the onset of the pandemic, many lenders were over-leveraged and reliant on capital partners to continue funding loans. However, warehouse lines dried up and institutional investors paused. Only the strongest, well-capitalized lenders prevailed. To protect yourself, identify their lender’s capital source. Are they lending their own money, using bank lines or brokering? Ensure they have an uninterrupted track record of funding loans as well as the strength and capacity to meet financial commitments and adapt to change. EXPERIENCE - There is simply no substitute for experience. Your sales associate, broker or lender needs to possess a broad perspective and know how to deal with challenging scenarios, unique market or property nuances, and fluctuations in the market. The industry has been feast or famine over the past decade and the pros who have weathered the ups and downs can bring that expertise to benefit you and your business. FINANCING OPTIONS – One of the biggest rookie mistakes is to focus on rates. Keep your perspective on the entire financing package, your investment goal and exit strategy. Leverage, points, fees and prepayment penalties are all part of that package. Credible lenders understand each unique scenario and offer loan options to meet individual needs. True capital partners are problem solvers. COMMUNICATION – Clear communication and transparency into the loan process are vital for building a successful capital partner relationship. Don’t get taken in by slick marketing that makes big promises, especially when actions suggest otherwise.
YOUR TRUSTED LENDING PARTNER®
Ready to build a financing strategy with a trusted lending partner to help you grow your business? Visit our website today at www.civicfs.com or call (844) 657-2858. © Civic Financial Services, LLC. All loans are made in compliance with Federal, State, and Local laws. Civic Financial Services, LLC is a California Finance Lender under NMLS 1099109 and the California Department of Financial Protection and Innovation License #603L321. Civic Financial Services, LLC is an equal opportunity lender.
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