Finance Roll

In today's economy, there is tremendous uncertainty among investors in a variety of commodities, including real estate. I wish I had the crystal ball answer to these questions but, sadly, I am left guessing just like other investors out there.

One of the biggest hurdles faced by real estate investor's in today's economy is the issue of funding. Funding sources seem like they are drying up, and the ones who are still 'open for business' are throwing up an endless array of hoops to jump through. It can be understandably very frustrating, on top of the fact that real estate is already a significant investment in its own right.

One funding option you might have heard of, but may not have considered for multi-family real estate, is hard money lending. In short, hard money is asset based lending, more dependent on the quality of the deal than the financials of the borrower. This should sound real good, right about now, especially if you are focused on multi-family real estate.

Why is this? Well, consider the traditional route for funding multi-family property. Both banks and the ever-decreasing supply of national commercial lenders also look very closely at the asset value of apartments. They'll want to see occupancy rates, rent rolls, and tax returns for the property, among other things. Oh yes, they'll also want to see what your financial strength is like too. Count on getting your personal credit pulled, your assets pored over, and your net worth analyzed.

I'd be remiss to say that hard moneylenders care nothing about your financial strength, because it does carry at least some weight. What I am saying is that it matters less to them than it does with traditional commercial lenders. What matters more to them is that the deals you find are solid investments, capable of producing good cash flow and sustaining themselves through good or bad economies.

In some way, if you're at all unsure about the merit of a multi-family property you're considering for investment, run the numbers by a hard moneylender. If they are interested and would consider issuing a loan for it, then it likely is a pretty solid purchase. If they run for the hills, that should tell you something too. The level of reception you get from a lender can speak volumes about the quality of deal you think you have.

Properly purchased real estate pays for itself by producing monthly cash flow income. Add to that the appreciation in value over time that real estate has also historically recognized and you have a powerful winning investment combination. When you can think out of the box and consider alternative sources of funding like hard money, more doors of opportunity can and will open for you.