With investment sector becoming diverse and comprehensive, the investment-related firms too have metamorphosed their functions accordingly. Today, companies do not only provide assistance and services related to investment tools and securities. However, there are a large number of professional organizations that work to finance individual or commercial investments. This implies that individuals can borrow money from these firms to invest in various investment avenues. One of the important investment landings is with respect to property investments or real estate investments.

Defining Investment Property Lenders:

Investment property lenders can be simply be defined as professional lenders or lending companies that provide credit to real estate investors. This is also termed as bridge loans. Such types of loans are mainly characterized by high rate of interest. One of the significant features of these lenders is that they provide loans to the investors to purchase a land or a property that is not fully developed or is in the transitional phase. Hence, the lenders provide these loans with a view that the investor or borrower would use the money to buy the property and then use it for productive purposes. Under these conditions the property lenders too stand to gain some profits along with their fixed rate of interest. All these factors depend upon the nature of contract between the lender and the borrower.

Features of Investment Property Lenders:

Investment property lenders have similar features to that of the usual or conventional lenders. Investment property lenders or investment lending institutions have the following features:

1) If the investors fail to return the loan within the stipulated time then the investor loses the property of investment and the lender becomes the legal owner of the property.

2) Investment financers in most cases finance up to a maximum of 90% of the value of the property.

3) Investment financers in most cases provide long-term loans that last for more than 20 years.

4) Usually, investment property lenders provide finance at a higher rate of interest than the conventional loan interest rate.

5) The property lenders obviously draft the lending contract and the other loan specifications based on the real estate market in the region or in the country.

6) Investment lenders provide finance for the purchase of all kinds of properties, namely apartments, studios, countryside homes, resorts and other properties.

Norms by Investment Property Lenders:

The investment property lenders provide property or real estate investment loans on the basis of certain yardstick. The borrowers must fulfill certain conditions before they can get the investment loans. Some of the significant norms are as follows:

1) The property investment financers get a thorough credit check done about the investor. The lending institutions often insist the investor on having a good credit rating for availing the investment loan.

2) As mentioned before, lenders lend up to 90% of the total value of the property. However, several large lending firms also lend up to 95% of the total value. However, the lenders follow this norm if the investor is investing in the urban areas. When investors want to purchase a property that is outside the urban purview then it is possible that the lenders decrease their lending proportion.

3) Usually, investment lenders finalize on a rate of interest that is equal to a maximum of 75% of the total rental income and 35% of the total personal income.

4) When investors borrow more than 80% of the total value of the property then the lenders also charge them with low equity premium or what is known as the mortgage indemnity insurance fees. The low equity premium is charged in order to make the lenders secure about the loan and provide them some cushioning against the high risk involved in financing property investments.

Tips on Selecting the Right Lender:

The investment lending market has become crowded with the large number of lending companies getting established almost everyday. Hence, it can be a really difficult job for the investor to find the right lender who can assist him in the precise manner. Hence, to help the prospective investors in their pursuit of choosing the right lender, following are certain tips that would help them in their goal:

1) It is necessary for the investors to check for the credentials and the exact profile of the lending company. As far as possible, investors must approach a lender who specializes in property investment financing instead of approaching a conventional all-financing company.

2) Also, investors are advised to select the most experienced financers in the market. Investment financing involves complex systems and processes. Hence, only an experienced team is eligible and qualified to handle these matters. It is always a good idea to go in only for an experienced investment financer.

3) It is important for the investor to keep away from temptations and seemingly lucrative offers. Selecting a lender only because of low rates of interest must strictly be avoided. Investors must select a lender on the basis of the overall quality of advise, professional approach and credibility of the lending organization.

4) It is important for the investor to verify that there are no hidden charges or costs charged by the lending firms. Also, investors must refrain from lenders who do not disclose their fees at the initial stages of the deal. All firms by law are required to disclose their fees to all their clients.

5) Also, investors must approach lenders that charge a pre-payment penalty but provide loans at a lower rate of interest instead of opting for lenders that provide loans at higher rate of interest without penalty.

6) When lenders ask a large number of questions to the borrower, it is a positive sign. The large number of questions must not frustrate the investors by the lenders. These queries only indicate that the lender is ensuring the exact type and extent of loan that the investor would or must go in for. These queries ensure that the borrower would get the right deal that he is looking for.

Hence, these factors help the investor in understanding the significance of investment property financers. The modern day real estate investments are almost impossible without the helping hand of these investment financers.