Loans for Real Estate Investing (And How Inflation Changes Them)

Lenders to have on your team, loans to get for real estate investing, and what inflation has to do with it.

Who are the lenders for real estate investing? Here are the basics of each lender and how rising inflation and interest rates will affect your relationship with them as you invest.

In real estate investing, there are three key lenders.

1) Banks and Credit Unions for Real Estate Investing

National banks don’t usually have many options for real estate investors. But local banks and credit unions love real estate investors.

Even so, banks are the most conservative lenders. They’ll be especially tight with their money until they figure out the new normal with updated federal interest rates.

As a real estate investor, bank loans will be increasingly difficult to get. It’ll be more common for banks to lend 60-70% of the LTV with high credit score requirements.

In the last few months, we’ve been receiving four times as many calls as usual from investors who typically go through banks for all their money. Already, investors are getting turned away by banks.

2) Hard Money Lenders

There are two types of hard money lenders: national and local. Each type of lender will approach the change in the economy in a different way.

Much like banks, national hard money lenders will tighten up on their requirements and options. National lenders were known for offering up to 90-100% LTV. Now, they’ll only lend 80% and their credit score range requirements have gone up. The higher your credit score, the higher your leverage with national hard money lenders.

Local lenders won’t change nearly as much based on the economy. Smaller lenders make their income by loaning money, so they’ll never tighten too much. Local hard money lenders don’t typically have any credit score requirements.

Get to know the hard money lenders in your area. They’re a valuable asset to have in your portfolio of lenders, especially now, and especially if your credit score is outside of the range of traditional lenders.

3) Real OPM Loans for Real Estate

OPM is Other People’s Money – from family, friends, neighbors, or other people in a position to lend. You might think that normal people wouldn’t want to loan you their money at a time like this. But you would be wrong.

People with money in the bank are making around a 1% return. So getting a 5%, secured return from you is way more appealing. OPM lenders won’t care about credit – as long as you secure their money and ensure them a return.

All three of these lending sources will be important. You’ll need a mix of all of them. Putting them together in the right way will accelerate your real estate career.

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