The most successful property investments are the ones that can earn a profit for the investor, and often, the best way to achieve that is by diversifying one’s portfolio. For lenders, that means offering a broad menu of loan options that can meet the needs of investors of all experience levels. The best lender-investor relationships are the ones with symbiotic investment results, where both the investor and lender are growing and succeeding with each project.
Creating lending opportunities that are appealing to investors will ensure that relationships are not just strengthened with existing partners, but new ones will continually be formed. Below are a few of the loan types that are sure to increase your monthly fundings.
Ground-up construction loans
While all projects that land on a lender’s desk can be deemed risky, the question is always a matter of how much of it is risk vs. reward. While both lenders and investors need to be on the same page in regard to project planning, expectations, and end goal, a successful ground-up construction project’s loan can be paid off within anywhere between 12 to 24 months. Unexpected delays and construction surprises aside, it’s not uncommon for investors to finance the early stage(s) of the project out of pocket until a certain threshold has been passed and a lender can come in to safely fund it the rest of the way.
An added bonus?
There are different types of construction loans lenders can offer—owner-builder loans, construction-only loans, and renovation loans each have specifications that set them apart from each other. Owner-builder loans allows investors to oversee the construction themselves, oftentimes cutting the overhead costs that would be associated with the project. Construction-only loans cover only the construction phase of a project and renovation loans apply to already existing properties that need more work than the average fix-and-flip.
For lenders, having different loan options can help them customize packages instead of working with a one-size-fits-all approach.
Short-term rental loans
Otherwise known as vacation rentals, short-term rentals are booming in popularity among investors, and they are a great way for lenders to increase fundings in a consistent matter. After all, revenue from short-term rentals in the U.S. is expected to show an annual growth of 10.55%.
Most short-term rental loans’ DSCRs are calculated on interest only, which is an appealing aspect to a prospective investor looking to keep more cash in their pocket and possibly use on other upcoming investment projects.
For well-rehabbed properties located in popular vacationing locations, the likelihood of solid bookings and continued cash flow for the investor is fairly high, meaning the lender also reaps those benefits and sees the loan paid off quickly and efficiently.
Long-term rental loans
The flip side of short-term rentals is the more traditional long-term rental property loan which is perhaps one of the most popular investment loans clients will opt for. Typically, investors are required to have a larger down payment and will receive slightly higher interest rates to set off some of the anticipated risk with funding a rental property (i.e., economic turmoil that can lead to evictions; high tenant turnover rates and vacancies). What’s great about long-term rentals is the flexibility they offer both lenders and investors: from single-family homes to 1-4 units; condos to townhomes, few property types are off the list.
For lenders, variety is the key to forging lasting investor partnerships. Offering exciting loan packages that cater to beginners as well as seasoned investors will not only broaden the scope of what projects they can be associated with and profit from, but also ensure that monthly fundings are ever increasing.
For more on the loan options Temple View Capital Funding, LLC (“Temple View”) offers, contact us today.