Types of Real Estate Loans

Those in need of commercial loans have various options of how to use loans to accomplish their needs and goals. Types of Real Estate loans include: bridge loans, fix and flip, hard money, refinancing, purchase, refinancing, or a cash out.

Why would you need a real estate loan?

We encounter many different reasons people need a loan here at Gravity. Our clients recently took out loans for reasons including: funds for repairs, funds to build a project, and a quick cash out before a sale to name just a few.

Who to borrow from?

Whatever your reason for borrowing, it’s important to look at your lending needs. Factors considered range from how fast you need funds to credit score. Different lenders serve different markets and it’s important to know a few of the basic ones. Leading lender types include:

• Banks: If you have good credit and a few months, then a bank may be the way to go. They offer the best rates because they take the least risks. Qualifying for a bank loan for commercial real estate isn’t a walk in the park. Real estate is often a risky market and banks have the luxury of avoiding risk. For this reason, the borrower needs great credit along with credible cash-flow and revenue.
• SBA: The Small Business Administration provides commercial real estate loans for small businesses to help develop operations and services for fledgling companies. The SBA only offers Loans for business purposes which immediately excludes most real estate investors. See the SBA guidelines for more information.
• USDA: The USDA provides loans to small business in rural areas of less than 50,000 people. The loans are offered by traditional lenders like banks and credit unions and are subsidized by USDA to mitigate risk. Regardless of the risk reduction, banks still require good to great credit.
• Private/Alternative Lenders: These lenders tend to be wealthy investors looking for investment opportunities. Alternative lenders specialize in quick processing for loans, as well as, flexibility on uses. In the end these lenders only wish to receive high return and are less worried about the use of the money.

Different lenders specialize in various industry segments. To find what you are looking for call the experts at Gravity Capital.

The Types of Real Estate Loans

• Bridge Loans: A short term loan used to acquire real estate or used to provide temporary financing. Bridge Loans terms tend to total 1-2 years and have higher rates based on the speed and risk involved.
• Refinance: Borrowing on a second loan to find a lower rate that the original. In addition, someone may refinance for a longer term or amortization of the original loan.
• Purchase: Buying property to be used for business operations or as an investment property. Purchases can be funded using any of the above providers depending on your situation.
• Fix-and-Flip: Investors borrow money to purchase single family, multifamily, or large scale commercial real estate. The purpose of investing is to develop real estate and then sell it to the highest bidder.
• Cash Out: This type of loan refers to cashing out on whatever equity present within the property or extracting money from equity owned free and clear to refinance.
• Hard Money: Real estate loans from private institutions. They finance based exclusively on collateralized real estate often ignoring credit score and other factors.

What Now?

Good Loans come in all shapes and sizes. For that reason we at Gravity Capital we provide the flexibility you need to succeed. Contact us today