Real estate investors are not consumers in the lending relationship.
When a real estate investor experiences the shift in mindset from consumer to business owner, the investor becomes vastly different from the average home buyer. Your new or expanding business is based on the ownership of cash-flowing assets. No longer are you spending money for a commodity. No longer are you indenturing yourself to debt. You, the real estate investor, should embrace that you are the CEO of your real estate investment firm, sharing risk in a business venture with a new partner. The lender should no longer be your foe in this, but a partner participating in the upfront risk in building of your business.
In a typical scenario where a business owner started a business with a partner sharing in the startup risk, he or she would have to pledge the commensurate percentage of ownership, revenue, and voting rights to the partner based on the percentage of capital invested.
The common arrangement between two partners is each contributing 50 percent to the start up. With 50 percent contribution one can expect 50 percent of earnings, voting rights, ownership, and profit from sale. Business has been done this way for generations. In the world of the conventional real estate investor, many invest approximately 20 percent of the capital to purchase the cash-flowing asset and the partner (lender) pledges 80 percent of the capital. Rather than the partner demanding 80 percent ownership and profit, the lender requires only monthly payments based on a very small percentage of the invested capital, and they sit silent.
Our collective decades of experience with thousands of investors can aid in making the investor’s business successful. That expertise is not only in getting the financing process complete in some of the most difficult circumstances, but also in offering suggestions based on how the most successful investors had built their businesses.
There are many in the lending world who can close a loan and do an exceptional job. There are, however, very few who understand how to use such skills to make the real estate investor’s plan even more successful. When looking into a partnership with a lender, be sure they are interested in a partnership with you and that they act accordingly. You are no longer the general consumer. You should not be treated as such.
DISCLAIMER: This article is for informational purposes only, contains the opinion of the author, not necessarily the opinion of SecurityNational Mortgage Company, and should not be construed as lending advice. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet LTV requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines, and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over life of loan. Reduction in payments may reflect longer loan term. Terms of the loan may be subject to payment of points and fees by the applicant. Equal Housing Lender. SecurityNational Mortgage Company Inc. NMLS# 3116. Any amounts, figures, payments or loan terms stated are based on continually changing markets, rates, loan programs and borrower specific qualifications, and subject to change without notice.
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