Not surprisingly, interest rates are higher than other sources of capital, particularly in very niche lending markets, including lenders that are not typically dealing with conventional borrowers that have 30, 60, or 90 days to close. Forget an apartment building in Manhattan that’s 100% occupied—niche lenders play a key role in the secondary markets where money is scarce if available at all.
In today’s market, it’s making more and more sense for borrowers to utilize a niche lender’s resources to either get a property stabilized or to get the borrower’s financials straightened out, so that six months or a year down the road that borrower can secure less costly conventional financing.
Interest rates are higher when you do business with direct, private lenders (or hard money lenders). The rates are higher than a banks, but in the long run it most likely turns out to be less expensive to the borrower. In many cases, borrowers will approach us in the hope that the potential for a 15% or 18% yield will still be a lot cheaper than bringing in an equity or joint venture partner, one that will be ‘on your back’ throughout the entire loan process and project.