Identifying a Good Deal: Commercial Private Money Lending
Whether you are the borrower or lender of a private money loan, it is imperative for you to be able to identify what is a good deal and what is a bad deal. In commercial private money lending, what defines a “good deal” depends upon your intent and the purpose behind your investment. The goal behind your investment can be for cash-flow, long term, or short term investing.
- Cash-flow Investing: Cash-flow investors invest to produce income in terms of cash in their pocket every month. A good deal for a cash flow investor would be 95-100 percent occupied, well maintained apartment complex with very professional property management. An apartment complex that has a break even occupancy point of 70 percent or less.
- Long Term Investing: A long term investor is interested in holding their in vestment over a long period of time to build wealth and pay down loan principal amount. An example of a good deal here would be a shopping center with a long-term triple net lease in a medium-sized town with an aggressive economy. Or an apartment complex built in the path of progress of new construction and job growth.
- Short Term Investing: Short term investors hold their investments for two years or less and their goal is to buy, fix, and flip. A good deal here would be buying at a really low price using very conservative resale figures. Or to purchase a easy fixer rehab property with little down payment and owner financing in a seller’s market.
For more information about commercial private money lending, contact the specialists at HML Investments today.