Advantages to Using Private Loans for Rental Properties

Posted by Michael Miller on August 20, 2018

Even seasoned investors may not be familiar with unconventional loans, such as those from hard money lenders or private lenders. Investors who have never used direct lenders may be unfamiliar with the process and advantages.

Fix and flip properties offer high profit margins. The faster you can begin work, remodel the home, and sell it, the more money you can make. Faster loan approval and closings improve cash flow for fix and flip investors by reducing the amount of time a home spends in inventory, and by helping ensure investors don’t miss out on the best properties. But there are just as many advantages to using unconventional lenders for buy and hold rental properties.

If you use a lender that offers lower interest rates than hard money lenders, with the speed and certainty of closing you won’t find with conventional mortgages, you will reap the rewards thanks to these advantages.

Private Loans Have Less Red Tape

Private loans typically offer a streamlined application process. Borrowers may not have to submit as much paperwork to show their income or jump through multiple hoops to qualify. This makes private loans perfect for investors who do not have traditional W-2 income but do have other qualifications that make them a good credit risk, such as a long history of successful investments. For landlords, showing income from several rental properties can help ensure you get the money you need from a private lender.

Less Red Tape Means Less Time Wasted 

Thanks to 5 Arch’s commitment to more efficiency and less red tape, the closing process is incredibly streamlined. Most borrowers who are approved receive their funds in as little as 10 business days and, sometimes, as fast as 24 hours for repeat borrowers.

Rent-and-hold investors are always on-the-go, whether they are overseeing renovations on a property, checking in with tenants, or screening new applicants—not to mention spending time on money-making activities like finding new properties to buy and rent. Having guidance from a 5 Arch loan agent means fewer trips to the mortgage broker’s office and more time for other crucial tasks.

Borrow More, With Less Money Down

Traditional lenders demand a down payment of 20 to 25 percent on most properties. Private lenders have more flexibility in the total amount of the loan and the down payment, so you may be able to borrow as much as 85 percent of the purchase price, even on properties valued at $500,000 or more.

With available equity and direct lending competency, 5 Arch can close larger loans faster, so you can turn that property into an income-generating SFR sooner.

Choose Your Private Lender Carefully

Not all private lenders are the same. Hard money lenders tend to sacrifice reasonable interest rates for a fast closing. You may get your money quickly, but you could get stuck paying double-digit interest rates.

On the other hand, 5 Arch’s borrower-centric approach offers speed and certainty of closing with single-digit interest rates. More than just a lender, we are a partner to seasoned investors, landlords, and brokers, helping our borrowers spot trends, make the best business decisions, and borrow better.

Get the Funding You Need Fast with 5 Arch:

Borrow Better℠ today!



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