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If you’re in the market for real estate, one of the most important decisions you will make is how you plan to finance the purchase. Fortunately, there are numerous options and strategies available, all of which depend largely on the buyer’s objective in acquiring the property. An experienced attorney can negotiate advantageous financing terms on your behalf and ensure you understand the risks and obligations that come with financing your purchase. Talk to LaFountain & Wollman P.C. today.
Mortgages and related forms of financing
A mortgage is one of the most common ways to acquire both residential and commercial property. But there are related forms of financing such as:
Syndicated mortgage loans. These are loans offered by a group of lenders known as a syndicate. They are especially useful for complex purchases that are too large for a single lender or for which expertise concerning a specific asset class is useful.
Commercial mortgage-backed securities (CMBS) loans. Secured by a mortgage on commercial property, these loans (also known as conduit loans) can be offered at relatively low fixed interest rates since banks don’t hold CMBS loans on their balance sheets.
Cash financing
Having personal funds to buy property, without the need to obtain a loan or external financing, offers several benefits. Cash is simple and lacks the interest and regular payments required by mortgages and other forms of financing. This approach, which foregoes the steps needed to secure a loan, is especially useful for buying distressed properties or those sold at auction.
Cash financing also allows more leverage in negotiating the price of the property because of the absence of financing conditions. Investors who are seeking discounted properties or looking to make a quick purchase should consider this streamlined method.
Hard money loans
Private individuals or businesses may offer short-term loans that are based on the value of the property instead of the borrower’s credit. This is where hard money lenders come in. Some advantages include flexible terms, a quick approval process, and the ability to finance purchases that traditional lenders might not.
If you are in the market for property that needs renovations or which you will only briefly own, for instance so-called fix-and-flip deals, you should look into a hard money loan. Properties with strong potential for substantial appreciation are especially attractive to hard money lenders.
Private money loans
These are useful for a diverse array of real estate purchases and investments, from long-term rental properties to real estate developments. Private money lenders are persons or groups who provide funds to investors in exchange for a return on their real estate investment. Examples include acquaintances, relatives, or real estate industry professionals. Compared with hard money lenders, private money lenders can offer even more flexible terms, more customized agreements, and usually lower interest rates.
Seller financing
When the seller of the property provides financing for the purchase, the buyer can skip the traditional bank financing process. Investors often prefer this approach because of the availability of beneficial loan terms. For instance, the terms are generally more negotiable and can work around credit requirements that other lenders may insist upon.
Seller financing is well-suited for residential properties, properties whose sellers are distressed, and multifamily units. Because this approach requires negotiation and collaboration between the buyer and seller, investors may use seller financing to purchase properties with lower upfront costs.
Exploring All Available Avenues For Your Purchase
The above are only some of the means by which you can acquire residential or commercial properties. It should be kept in mind that every real estate translation is unique, and so is every approach to purchasing it. With LaFountain & Wollman P.C. representing your interests, you can decide the most appropriate method for completing your purchase. Give us a call today.