Like most real estate property investments, success starts with a good blueprint. The best blueprint comes from an understanding of what real estate lenders are looking for. We’ve put together the below information from our investors to help you evaluate what commercial real estate lenders look for when evaluating investment opportunities in peer-to-peer lending.
High Return on Investment
Investors are looking for good opportunities to invest their hard earned money. A good investment opportunity would be one that provides them with a higher interest rate. Peer to peer lending allows investors to make a higher return on their investment, but it also saves the borrower money when compared to higher priced hard money loans.
Loan To Value Ratio Of 65% Or Less
Loan to Value Ratio (LTV) is a comparison between your loan amount and the value of your investment property. Lenders examine the LTV before approving a mortgage. A commercial real estate lender will calculate the LTV by dividing the amount of the loan by the property’s appraised value or purchase price. Typically, a high LTV ratio is seen as a higher risk. For example, if your request is for $300,000 loan on a property valued at $500,000, your LTV ratio would be 60%. If you can show that you have skin in the game or you’ve found other investors or resources to help fund your project, peer-to-peer investors will be more likely to consider your loan request. Blackhawk lenders are typically in search of a LTV of 65% or less on a loan of $250,000 or greater.
Fixed Maturity Dates
A fixed maturity date is the date on which the principal amount is due and interest payments stop. The fixed maturity date is also the termination or the due date on which an installment loan has to be paid in full. An ideal fixed maturity date would be one to three years.
For investors, one of the biggest benefits to commercial real estate lending is that the assets are secured by the property itself. Peer-to-peer lenders often select real estate investments for this reason. The commercial investment property is used as secured collateral, if a debt is not paid, the property is forfeited and sold to pay back the investor including all the outstanding interests and costs to collect.
Right now, as a real estate developer you have a great opportunity to fund your upcoming projects if you are taking into consideration the key elements lenders are evaluating their options with.
Do you have a commercial real estate project in need of funding? Contact Blackhawk today to get started.