Private Money Lenders And Loans For Real Estate Investors
This BLOG On Private Money Lenders Was UPDATED On December 5th, 2018
What is private money?
- Private money lenders are investors who pool their funds together
- They lend to real estate investors looking for short term financing
- Private money lenders are not regulated like residential mortgage lenders
- Federal and state mortgage lending guidelines and RESPA laws do not apply to them
- Every private money lender can have their own lending requirements
- However, most private money lenders are concerned with investors putting skin in the game which is a larger down payment on their property purchase
- This is not the end of the world
- 90% of people that walk into their bank, local credit union, or even their mortgage broker’s office and try to get a loan on their investment single family, 1-4 unit, or commercial property get turned down
- Private money lenders have much easier lending requirements than banks or traditional lenders do
In this article, we will discuss and cover Private Money For Real Estate Investors.
Private Money To The Rescue
Don’t let the above discouraging statement get you down.
- Private Money or Hard Money Lenders can offer you a solution to your mortgage cash needs!
- Often, they can get you a check-in less than 10 day
- Take just 3 minutes of your valuable time and read this entire article
Credit Criteria For Private Money
Banks want 2 years, sometimes 3 years of tax returns.
- They want you to have perfect credit and heavy cash reserves
- Most of the time they want those reserves deposited with them — the bank you are applying for the mortgage with
- They may even tell you yes upfront
- Then have you spend $450-$750 on a residential, or $2-$4,000 on a commercial appraisal; then we they get all the facts to send your loan to the “evil loan committee”
- This typically means the bank loan officer wasn’t that confident about your loan application in the first place
You are more than likely on your way to getting turned down.
Private Lenders Think Outside The Box
Borrowing from a bank to get cash to buy another property, repair or rehab your current investment property has never been more difficult.
- Banks don’t look at your end game, but if you have $2,000 in your pocket, they want you to deposit it. If you put your $2,000 in a cd for 5 years, they will lend you a $1,000
- How nice of them
- Remember when we as a country raised taxes again to give the banks trillions of dollars again to bail them out and make lending so much easier
- Did they make cash more available?
Private And Hard Money Lenders Are The Angels For Home Flippers
Private and Hard Money Lenders ironically have become the champion of the Real Estate Investor, and property “flipper” and “rehabber.”
- This hasn’t happened because it was the Private Money and Hard Money Lender’s grand plan
- It’s happened on accident and out of necessity
3 Golden Rules Of Private Money
The 3 “Golden Rules” of the Private Money Lender and Hard Money Lender are:
- If you have a lot of equity on your single-family home, 1-4 unit, or commercial property, they will lend you money, and
- If you have a good exit strategy or purpose for borrowing the money, you are more likely to get the loan
- For example, you need the money to buy another property that you are going to fix up and “flip,”
- or you need to fix the property you are borrowing money on so you can sell it
- You are going to pay a higher rate than you would at a bank typically from 12-15% as opposed to 4.5-5.5%
- So, reflect back to “Golden Rule” number 2
- This is because you will have to demonstrate to the Private or Hard Money Lender why borrowing the money at a higher rate will improve your overall financial position
Lenders Want You To Make Money So They Make Money
The Private and Hard Money Lenders want real estate investors to make money so you can keep coming back and borrowing more money.
- They don’t want to be foreclosing and having their attorneys make money
- Once borrow develop a strong business relationship with private money lenders
- Lenders may begin to ease up on fees, and down payment requirements
Investment Loans With Bad Credit With Private Money
Often, Private or Hard Money lenders will lend you money regardless of credit and without 2 years of tax returns.
- I want to repeat that: You don’t always need to show Tax Returns with Private Lenders or Hard Money Lenders
- However, you typically need a property with a lot of equity
- Most Private or Hard Money lenders will only lend you 65% of what your property is worth
Contact Us If You Need Partnership With A Private Money
If you have any questions or comments or would like a referral to reputable Private Money or Hard Money Lenders, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at email@example.com. Private money loans are available in all 50 states.