Borrowers use Private Lenders, also known as hard money lenders, for reverse 1031 exchanges because these transactions require speed, flexibility, and specialized structuring. In a reverse exchange, the replacement property is acquired before the relinquished one is sold, demanding fast access to capital—something private lenders can provide within days. Unlike traditional lenders, private lenders focus on the asset’s value rather than the borrower’s income or credit, making them more adaptable to complex structures like Exchange Accommodation Titleholders (EATs).
They also offer short-term bridge financing, allowing borrowers to close on the new property while waiting to sell the old one. Once the original property sells, the borrower can pay off the private loan or refinance. With fewer documentation requirements and customized terms, private lenders are an ideal solution for time-sensitive, tax-deferred transactions that conventional lenders often can’t support.
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