Different Types of Loans for RE Investors & When to Use Them

Learn about the different types of loans offered for investment properties and when to use them.

Investing in real estate can be very profitable, but in order to make money, you must have money. Many investors opt to take out loans in order to purchase investment properties. This allows them to purchase properties quickly and without interruptions from having to save up money or raise their own capital which could take more time.

There are many types of loans offered for investment properties, however, you’ll want to consider the particular investment, your personal financial standing, and your overall goals with the project before deciding on a loan. You’ll want to ensure the return on the investment is high, the risk is low, and that the investment won’t mature after the loan is due.

Let’s take a look at the different types of loans offered for real estate investments and in what circumstances you would utilize each one.

Conventional Mortgage Loans

Conventional mortgage loans are offered by private entities, such as traditional banks or mortgage brokers. Standard requirements are a 20% down payment, a good credit score and history, and proof of monthly mortgage payments on other income properties if applicable. This is a very common loan for investors that are purchasing a single family home as an investment property. Investors who own a home themselves will likely be familiar with this type of loan.

Hard Money Loans

Hard money loans can be obtained through a lending company that specializes in financing real estate investments. These types of loans are sometimes preferred by real estate investors because they are much quicker and easier to secure than a conventional loan. While it is less of a headache to get approved, it is important to note that hard money loans are short term loans and come at a higher interest rate. Because of these factors, most investors seek out hard money loans on fix and flip projects.

Private Money Loans

Private money lenders differ from hard money lenders in the fact that they are not always professionals operating under a larger company. These individuals, often found within your personal network, seek out investments with solid returns to put their money into. Private money loans are very flexible and can be a great option for investors that were denied a loan from the bank.

Commercial Investment Property Loans

If you are investing in commercial real estate then the loans previously mentioned won’t work for you. Commercial investment property loans differ from residential property loans in that investors must present a lot more than a down payment and good credit history in order to obtain the loan. They must come prepared with a plan which could include rehab budget, improvements, time to complete, exit strategy, etc. These types of loans would be useful for properties such as multifamily apartments, office buildings, hotels, or retail spaces.

Whether you are investing in a commercial property or a residential property you can surely find a financing option that suits you! With an abundance of options, the best loan is the one that fits the type of property you're investing in, supports your financial standing, and helps you accomplish your goals.

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About CALCAP Lending

A division of CALCAP Advisors, CALCAP Lending benefits from the expertise of a seasoned team of professionals with extensive, successful track-records covering a variety of disciplines and leading large, nationally-recognized institutions. A private money direct lender, CALCAP Lending provides short to mid-term financing for property investors and businesses looking to purchase, refinance, renovate, and construct residential or commercial properties.

Lending FAQs

You've got questions, we've got answers.

What is private money lending?

Private money lending is a collateral-based lending strategy that is often associated with shorter terms and more attractive features. A private money loan offers more flexibility than a conventional mortgage or bank loan.

How does a private money loan work?

Private money lenders provide financing using money from private entities. Private money loans often work as bridges to help investors gather funds to achieve their short term real estate goals, but long term, permanent options may also provide.

Why would I choose a private money lender?

There are many advantages to using a private money lender for your real estate investments! Private money lenders can be more lenient when it comes to borrower credit issues, often there are no prepayment penalties, you can leverage your cash to buy multiple properties, and private money loans are quicker when compared with institutional loans.

Can I get prequalified for a loan?

CALCAP has a responsive loan team who are able to prequalify you. Contact a loan specialist at 833.816.5580 to get started.

How long does the lending process take?

Private money lending can be a quick and painless process. From start to finish, 30 days is common, however, turn around times can be as short as 10 business days.

Can I still be approved for a loan if I have bad credit?

Generally yes, we understand that people have temporary financial issues that come up, and we want to work with you to help you rise up financially to a better place. Offsets to credit concerns may include experience as a real estate investor, good cash reserves, and/or larger down payments.

I am a broker or investor, how can I work with CALCAP?

Business is built on relationships. Ours is no different. CALCAP Value and Preferred Partners receive exclusive rates and services. For more details and to submit your application, visit our partners page.

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