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Will private money lending grow in commercial real estate?

As we have noted in prior posts, the commercial real estate market in New York City is poised to grow in 2017. Even with such optimism, it is critical for lenders to properly vet potential investments. Similarly, this growth is also attracting private money lenders. There are several indicators supporting this trend. This post will highlight a few.

Housing market stability – Given the past growth in the residential housing market (particularly the luxury sector) fewer private money loans will likely be used on residential projects. As such, investors may be more comfortable with issuing private money loans to fund commercial projects because of the greater potential for a return on their investment.

Higher interest rates – Indeed, hard money loans are going to be more expensive than traditional bank loans. But with interest rates on traditional loans increasing, the market is such that private money loans may be just as competitive given the potential return on investment.

Overseas activity – While the majority of hard money loans occur in the United States and Canada, more of these loans are being used for commercial real estate endeavors across the world, it is likely that more of these loans will be used for international investments.

Indeed, private money lenders may not have the same restrictions and protocols that institutional lenders may be required to adhere to, it is particularly important for investors to have loan documents reviewed and detailed by experienced legal counsel. If you have questions about these loans, a skilled real estate attorney can help. 

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