The mortgage world is a feast or famine business. And with today’s refi boom most originators’ bellies are full. But if you’re looking ahead at what your next big opportunity is in 2021, you don’t have to look further than an investment real estate channel.
15 to 20 percent of a typical originator’s prospect database is a potential investor who may need a private money loan to buy an investment property as a rental or fix and flip a property in today’s hot market. Also, investors are often real estate agents, which makes them a great source for future business.
Why Private Money Lending?
Make no mistake, interest in private money loans – once considered ‘hard money’ loans – is growing.
The private lending industry currently accounts for $50 to 60 billion in originations and growing. Institutional capital from Wall Street is pouring into this space, making it very lucrative due to it’s high yield and measured risk. Conventional lenders and mortgage brokers are aligning themselves with trusted private money lending partners because they understand the value of serving investors.
The average borrower on a primary residence gets a new mortgage every four years and refi’s a time or two. The average real estate investor, finances four or more properties every year. More experienced investors purchase a dozen or more annually.
Because they are based on the “hard” asset, rather than the borrower’s qualifications, a key benefit of private money loans is that they are considered “business purpose loans”. There’s no TRID or difficult consumer regulations, so they typically close in 7-10 days, enabling borrowers to compete with cash buyers on lucrative deals or in competitive markets.
Best of all, it’s easy to add private money loan options to your current lending portfolio as they are much less complex and challenging than conventional mortgages. Even those brokers with no experience with private money loans can learn to qualify customers in no time.
How to Select a Private Lender
When surveying the market of private money lenders to partner with, it’s important to know how strong and stable their business is. The pandemic shook up the private money industry significantly. At the onset, many lenders were over-leveraged, and when warehouse lines dried up and institutional investors paused, margin calls ensued. Many private lenders paused or shuttered entirely. Only the strongest, best-capitalized lenders continued lending uninterrupted and prevailed.
To protect yourself and your clients, identify your private 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.
Check out their loan product offerings and ensure their loan options and pricing is clear. To succeed in this space, you will need products for short term Bridge loans, long term loans for rental properties and financing solutions to cover full rehab and construction costs. Credible lenders understand each unique scenario and offer loan options to meet individual needs. True capital partners are problem solvers.
Your Trusted Lending Partner™
CIVIC Financial Services is a leading institutional private lender. With CIVIC as your capital partner, you can serve grow your business and serve customers throughout their entire real estate journey – purchase, refi, fix and flip or long-term rental.
In 2020, CIVIC onboarded more than 600 Brokers to its Wholesale Channel and added several Correspondent Partners. In spite of the pandemic challenges, CIVIC funded more than $1B in loans in 2020, bringing funding volume since their founding in 2014 to more than 10,000 loans and over $4.3B
To be sure, the mortgage business is a feast or famine market, and this certainly isn’t the time to take up golf. For opportunistic originators, there is always more on the menu than there appears – and a Private Money Lending partner might be the most rewarding meal of all.
Check out this video interview with CIVIC’s president William Tessar and download CIVIC’s free guide ‘Keys to Success in a Post Refi World’ at https://www.civicfs.com/cmba