What is the Role of a Soft Money Loan in Real Estate Investing?

Updated: Jun 3

When deciding upon what type of loan you want to get for your real estate investment, it’s essential to keep up to date with the market trends, new investor programs, and fluctuating rates.


If you’re new to real estate investing or a seasoned professional, you might have heard about the latest innovative loan program available on the market; the soft money loan.

In real estate investing, the role of a soft money loan is to provide the financing you need to acquire your desired investment property. The soft money loan program has become the go-to for private lenders and borrowers as it straddles the line between a hard money loan and traditional bank financing.


What is soft money, and what makes it different from the other options?


Soft Money is a type of loan that offers long-term financing options for real estate at low costs and interest rates. Soft money is cheaper than hard money, the industry standard for real estate investment. Additionally, soft money grants the option of long-term financing through loans such as 5/1 ARM, 7/1 ARM, and 30 Year Fixed, which is not covered by hard money loans.


Like hard money, getting approval for a soft money loan can be as simple as submitting your credit score and LTV ratio, making it much simpler and faster to get approved than a traditional bank loan. Comparatively, soft money loans typically get approved within 2-3 weeks, which is on par with hard money loans. In addition, soft money loans are not restricted to specific property types, as they can work towards single-family, multi-family, commercial, mixed-use, retail, office, industrial, warehouse, condo, and townhouses.

In terms of financing, you can get rates starting at 5.25%, get a loan amount between $100,000 and $5,000,000, and hold an LTV ratio of up to 85%. Overall, soft money loans are a simple solution for those looking to get into the real estate industry.


What is the role of Soft Money?


Soft money is an in-between option for hard money loans and a traditional bank loan, bringing a new dynamic to the real estate market and its future. With the advent of soft money, many people, who have not had a chance at the real estate market before, can get involved without going through the bureaucratic process of a traditional bank loan or getting intimidated by the costly hard money solution.


The barrier to entering the real estate investment market is lowered, and more people can acquire funding and financial support at lower costs and lower rates. It is a great way to get started within the real estate investment circuit, as well as if you want to maintain investments at low costs. Additionally, with a new way to acquire long-term financing at a lower price, there are more affordable options for people to work on their properties or dream homes. They can use the funding to help build and improve their homes to increase their market value and use it to improve their community.


Soft money loans are both revolutionary in their ability to lower the barrier to entry for the real estate investment market and bring new options to the real estate market that help elevate communities.


What is next for soft money loans in real estate investing?


As more and more people are granted the ability of funding for their real estate projects, soft money loans will compete against hard money loans on a grander scale. Soft money loans will match the level of quality and efficiency that hard money loans offer in a way that will rival hard money’s hold on the real estate market as the dominant loan program.


Soft money loans are the future and will help shape communities and individual's lives in a way that was previously only granted to a very few. Lending will be much easier and more accessible as going to the bank will become less necessary and relevant for those looking to buy an investment property. In addition, soft money will help grow the real estate space such that it helps build more affordable homes and more building spaces. Overall, soft money is opening many new doors previously closed off before, and it is very exciting.


For more information about soft money, visit Stratton Equities. Call us at 800-962-6613 or contact us via email info@strattonequities.com and apply now, or just Click Loan Prequalification to find out whether you are eligible for loan pre-qualification!



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