Research the whole market
There are many traditional and alternative lenders out there who are structured and funded differently. Make sure you are viewing the full spectrum of lenders.
Speaking to an expert like Brickflow helps to cut through this complexity. They make it their business to know the whole market so can help with your search.
Take a strategic approach to the market. Most lenders know each other, so it can undermine your chances if you take a scattergun approach and send the deal to every lender.
When using a combination of lenders, perhaps in a senior and mezzanine structure, make sure you know if they have worked together before and have an inter-creditor deed in place. This should ensure a smooth process, competitive terms and help you avoid extra costly fees.
Don’t put all your eggs in one basket. It’s advisable not to have all your deals with just one lender and not be exposed to one capital source.
Identify and mitigate risks
All real estate transactions have their quirks. The best possible terms will become available if you can show these have been identified and mitigated by you rather than by the lender.
Mitigating construction risks is quite straightforward. You can build a lot of credibility if you’ve identified areas of concern and thought about them from a lender’s perspective. Similarly, with investment property if there are issues with, for example, a tenant’s financials, showing a lender how you can build in a guarantee or put something in the lease will help.
Risk mitigation is just as important in relation to the borrower. If there are skills or experience missing, it’s crucial to show you are surrounding yourself with the right people to ‘plug the gap’.
Lenders want to see that borrowers have analysed the risks and provided a risk mitigation strategy. While lenders will most likely tweak this strategy, providing one in the first place increases the chances of improved terms.