How brokers can position private lending as a strategic advantage

Real estate brokers have a myriad of choices to make regarding their business, its market focus, clientele, and the program options they supply. These industry professionals are best served, ultimately, by what can provide them, and their clients, advantages over the competition.

Enter Private Lending. In an industry where speed is a top priority, any route to less stringent approvals and faster closings cannot be overlooked. Private has the ability to offer speed, flexibility, and closing power that other funding sources struggle to match. These metrics, in tandem with a fuller spectrum of product solutions, illustrate how private lending is a strategic advantage for brokers and can be leveraged to expand their business with investor clients.

Expanding brokering business

The principal reason private money represents a strategic advantage to brokers and their investor clients is simultaneously the specialization of these lenders and the variability between them.

Private lenders tend to focus on a particular subset of real estate properties within their programs. One lender may focus on residential properties, and another may focus on what is known as “true commercial” properties like warehouses, offices, and retail spaces. Even predominantly residential lenders can differ from one another by the size and scope of the properties they work with. While one lender may work best with smaller unit counts, another may provide larger scale residentials with dozens to hundreds of units.

This specialization among private lenders is an incredible asset for brokers and their clients. By working with multiple lenders, each varied in the deals they are able to provide for, brokers can maximize the program coverage that they can turn around and offer to their clients. This means fewer dead scenarios and the potential for more business overall.

Breaking down impediments for investor business

Many private lenders have access to in-house amenities like processing, underwriting and originations. Having tools like these at their disposal allows these lenders a level of flexibility that often spells success for brokers and their investor clients. The driving force behind this success is in the proprietary scrutiny which private lenders specifically can apply to the applications they receive.

Even if both are applicable to residential property, conventional and private mortgages live in very different worlds. Conventional loans often have requirements that can make obtaining funding for certain properties and purposes time-consuming and difficult, if not impossible. Conversely, private lenders are not beholden to conventional lending standards, and so they can narrow in on what is most crucial to the purpose of the loan while trimming away any excess leading to faster closings and more strong deals making it to closing.

This context informs the way private lenders structure their products, and they do so with the investor client in mind. As an example, a private lender may have zero prepayment penalties on a short-term loan to rehab a property. This means that the investor client can execute on the next phase of their business strategy without a financial impediment from the lender. Whether they intend to sell for profit or refinance to hold that property as a rental asset, the investor can do so without worrying about being stuck with that loan for its full term or having to pay a penalty for resolving the loan ahead of its term. If it is the case that the borrower wants to refinance that freshly rehabbed property to hold for its rental cashflow, private lenders can dual-qualify the property during vetting for the initial rehab scenario to further streamline that investor’s strategy into a refinance. Brokers can position these program options to investors as a faster and more seamless process for handling the stages of their business strategy all with a single lender who specializes in these kinds deals scenarios.

The scrutiny with which private lenders approach their programs means they can employ a common sense underwrite which focuses primarily on the asset itself, rather than the borrower, as well as minimal documentation. Brokers can package these points about private lending processes to inspire confidence in their clients with a, comparatively smoother, faster, and lower-hassle experience.

Private lenders go one step further to facilitate clients who pursue multiple investments or who’ve made their investing business their mainstay. Private tends to focus on proof of dedicated liquidity rather than standard W-2 income requirements so as not to impede borrowers simply on the basis of self-employment or simultaneous investments. When even lower-volume investors apply for funding, repeated hard inquiries can damage their credit in a debilitating way. Private lending has options for non-invasive, soft inquiries to ascertain credit worthiness, meaning that investors don’t have to fear the repercussions of applying for funding they might ultimately not receive, enabling them to focus on more deals and generate more business.

Private as a strategic asset

Brokers who position themselves as knowledgeable guides throughout a real estate transaction have a greater chance to prove their indispensability to the clients with whom they interact. Part and parcel to this is providing effective solutions that meet the needs of individual investors and their equally unique scenarios. Private lending, as a service and as a network, provides brokers with the tools and options they need to meet investor demand, no matter what the scenario calls for. This is accomplished with Private lending’s wide breadth of investor focused programs, streamlined processes, and removal of common impediments. Brokers can leverage these investor-focused program options in their marketing to position private lending comparatively among the solutions they offer.

Andy Bates, Partnerships Coordinator with RCN Capital, leverages his experience in sales and client services to establish meaningful relationships with clients and partners alike. Andy has made it his mission to expand revenue channels and services through lasting, strategic partnerships. In his journalism, Andy combines market data with industry perspectives to provide insight for real estate and investment professionals.

This article was provided by RCN Capital