Private Equity Lending
Whether you’re looking for your first real estate investment property or your first home, choosing the right loan and lender for your situation is extremely important. Our Private Equity loans can help bridge the gap between traditional home loans and mortgages and pay out-of-pocket for your property.
Private Equity Definition
Private Equity loans are all done privately, outside of conventional banking establishments. Typically, this is done by private individuals to the loan seeker.
The average loan term for private equity loans is 12 months as opposed to 30 years for a typical home loan through a traditional lending institution. While there are dozens of hoops to jump through for a typical loan, private equity loans are quicker and require fewer steps to complete.
Often these types of loans are sought out when an investment might not be approved by a traditional institution. Private Equity lending secures the loan by looking at the property and its value, the investor’s credit score, and any collateral you put up. The amount of the overall loan is determined by these factors.
How to use your Private Equity loan
Just as every person is different, every loan application, even for Private Equity loans, is unique.
Private Equity can be used in any number of ways but the most popular are house flipping, property development, and personal loans.
Speed is the name of the game when it comes to house flipping and private equity loans and lenders are quick to jump in on these types of opportunities. Today, many real estate investors are utilizing private equity loans for their investment properties.
With a short private equity loan, house flipping naturally lends itself to being profitable in this situation. By using the money to spruce and fix up the house, then getting it back on the market quickly you’ll be able to repay the loan without incurring much for the interest.
By using the up-front money from a private equity loan, property development and new construction can take off. But because of the often unpredictable nature of construction projects, a Private Equity loan is riskier for both the lender and investor. Building quickly and on schedule is crucial to using a Private Equity loan for property development.
Private Equity loans are often taken out to finance renovations or repairs that wouldn’t be covered under a traditional loan. Keeping track of your expenses is crucial as repaying the loan happens quickly and costs can be steep with the shorter loan period.
Who does Private Equity lending?
There are several large private lending firms that do private equity loans across the country. Here at Global Integrity Finance, we’re funding Private Equity loans everyday.
In addition to nationwide companies, local private lending institutions may offer Private Equity loans for your next project that connect you with lenders in the community.
There are several things to consider when choosing a Private Equity lender and questions you can ask to determine if their services are right for you.
Are you the actual lender or just a broker?
Lots of Private Equity and investment firms work as brokers between lenders and investors. Making sure you know who is lending you the money and who is just handling the deal can help you determine how much or how little your lender will be involved.
What project details or documents are needed for a quote?
Because the value of the loan is determined by the value of the property and the subsequent renovations, the lending institution will need to see some plans and projections to determine the size of the loan. Be prepared to bring the needed paperwork to get a quote from the Private Equity lenders.
How do you handle interest?
When looking at a loan, you always need to factor in interest. Some institutions charge interest monthly or at the end of the loan so asking what the Private Equity lenders are planning to charge and when they expect it to be due, is crucial to planning for your finances.
Finding financing for your first home or your next investment project can seem daunting. Private Equity loans bridge the gap between out-of-pocket spending and traditional home loans by offering short-term loans with fewer restrictions and requirements.
While the loans have fewer restrictions and requirements they have a much shorter period to be paid back and costs can be steeper. Private Equity lenders can be found in nationwide companies or smaller lending establishments in your community but be sure to ask pointed questions so you’ll be prepared.