Bank or Private Loan: Which Financing Strategy Should You Choose?

What to consider when choosing a lender for your real estate investment.

Borrowers looking to increase their assets and diversify their portfolios have more financing options today than ever before. Yet securing the proper financing for a real estate project can prove to be challenging, especially considering investment strategy is not a one-size-fits-all approach. Investors can choose to borrow from a traditional bank or a private lender and it’s important to note the complexities of each to see how they fit into your overall plan. Let’s take a closer look at these two popular financing methods.

Borrowing from a bank

Bank lending is the most traditional and commonly sought-after financing strategy for commercial real estate professionals. According to a recently published report by the Mortgage Bankers Association (MBA), 2018 was another stellar year for commercial and multifamily mortgage originations with a 14 percent rise in borrowing reported at the close of the year. Additionally, a preliminary measure from the 2018 fourth quarter mortgage originations survey pointed to volume that was 3 percent higher than the record-breaking $530 million reported at the close of 2017. Multifamily, industrial, offices, hotels, and retail spaces ranked as the most in-demand properties contributing to this increase.

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