Buying and selling real estate can be a time sensitive endeavor. Time is even more important when you are talking about commercial investment property. Anyone who has bought and sold property as an investment knows that time is of the essence. Perhaps that’s why so many property investors appreciate the hard money industry.
The hard money industry is dominated by lenders like Salt Lake City’s Actium Partners. These are private lenders who specialize in funding projects that banks and credit unions are not as well suited to handling. Property investors tend to appreciate hard money lenders due to the speed at which they can get loans approved, closed, and funded.
Why the Time Issue Exists
If you are not familiar with real estate investing, you might not understand why the time issue exists to begin with. Why is it that investors need to work quickly? Why do they need lenders who can approve, close, and fund loans faster than banks? It is all about the nature of commercial real estate.
The commercial real estate market is very much a supply and demand market. As such, there are multiple factors that can influence an investor’s ability to obtain attractive properties at the desired price point. Some of these factors can be influenced on a daily or weekly basis. This suggests that market conditions can change very quickly.
3 Primary Concerns
Actium Partners explains that there are three primary concerns in real estate investing, where time constraints are concerned. They are:
- Market Trends – Market trends in commercial real estate can turn on a dime. The market can look rosy today and start faltering tomorrow. Likewise, a real estate investor could have his eye on an attractive piece of property at a below-market price only to find that the asking price climbs significantly a few days later.
- Seller Willingness – Commercial property sellers are similar to their residential counterparts in the sense that they are more willing to sell when a potential buyer can close quickly. Where investors are concerned, one of the keys to closing quickly is arranging hard money financing in a matter of days rather than weeks.
- Interest Rates – Interest rates are a concern in hard money just as they are with traditional funding. Rates can fluctuate rather quickly depending on the state of the economy. An investor may not be able to lock in a particular rate for a long period of time, so he has an urgent need to get new deals closed before rates change.
Most things in commercial real estate move quickly. Seller’s list a property for sale and anticipate entertaining potential buyers almost immediately. Buyers look at available properties with the expectation of making a purchase decision shortly thereafter. When multiple investors are interested in the same property, it often boils down to the one capable of closing the fastest.
The Big Advantage of Hard Money
The big advantage hard money has in all of this is that it can be arranged quickly. Hard money lenders can be ready to close and fund in a matter of days. Although not routine, Actium Partners has been known to close and fund in just one business day. That is sometimes what it takes to secure a lucrative piece of property that multiple investors are interested in.
Commercial property deals are often time sensitive due to the nature of the market. When time is of the essence, investors cannot afford to be waiting around on funding. They need fast approval, quick closing, and immediate funding thereafter. That is what wins the day on so many deals.