Real estate investors are always looking for their next conquest, their next opportunity. Those conquests and opportunities take money, and any good investor knows that you spend other people’s money before spending your own. Yet, real estate investors are great at finding that next investment, but they aren’t as good at finding other money sources, like a private money lender. If you’re one of those people, keep reading for a few secrets.
What Is A Private Money Lender for Real Estate
Choosing and using the right lender is a primary key to being successful in real estate investments. Choosing the wrong lender for an investment can be costly and frustrating. To choose the right lender, you should understand the distinctions between the different lender types:
The Hard Money Lender or Private Money Lender
Banks and mortgage companies are your traditional lenders for mortgages, home equity loans, property investment, and small business loans. These lenders require good credit scores, stable employment with a steady income, and a clear, solid business plan. The interest rates are low, and the terms are long, but it takes a long time to get the loan funded, and even once the loan is funded, there are countless requirements and stipulations attached.
A hard money lender or private money lender have similar loan types, with some differences. These lenders fund loans based on the asset, offset by the investment property’s value after repairs. They approve, and fund investment loans fast, many times same day funding, and without any credit history requirement. Because these lenders know they are taking a risk on the investment property, they charge higher interest rates.
What is the difference between a hard money lender and a private money lender? The private money lender is typically one person and only funds a certain number of loans. A hard money lender will usually have more capital and can fund multiple investments at once. Depending on your own investment goals, you should choose the lender with the advantages and risks that suit your needs best.
How To Use Private Real Estate Lenders
Choosing the right lender to fund your investment is knowing when a private money lender is right for your real estate investment, and that may depend on the type of investment. A private money lender that is an investor may offer more options for an investment property loan. So, what type of investments would private money lenders be more likely interested in funding?
» Fix and Flip Loan:
Fix and Flip Loans, This type of loan gives you the funds to purchase a property, makes need repairs and upgrades, then sell the property. A house flipper uses this hard money loan because of how quickly it funds more flexibility. Various types of properties are considered the perfect option for this type of loan funding.
» Home Rehab Loan:
For the investor seeking a rehab project loan, it requires a special kind of loan. A house flipper chooses to use this type of loan for one-time repairs and upgrades for a rental property. Because it funds faster, they can get the property ready-to-rent faster and get the income flowing faster.
» Bridge Loan:
Bridge loan covers gaps that real estate investors may face with different real estate projects. The loan may be to fund expensive repairs on an already existing property or to prevent foreclosure.
» Traditional lender:
This is the better choice for funding a long term project like commercial investments or long term rental property.
» Private money lender:
This type of lender works with real estate investors every day and is the most common for investors. This type of lender will offer a loan on a specialized property where other lenders are less likely to venture. Private money lenders are often a real estate investor themselves and are usually more willing to work finding the right type of loan for your property.
Secrets to Finding Private Money Lenders For Real Estate
Private money lenders are out there, you have to meet the challenge to find the one that will fund your real estate deal, and that takes preparation. First, you need to determine the right lender for you: a hard money lender or a private real estate lender. Then you can do an internet search when you find thousands, even millions of real estate-focused private lenders, but the internet may not be the way to find the best lender. Other ways of finding a private money lender are:
1. Your existing network
Make a list of family, friends, and colleagues that could be interested in a real estate venture. Sometimes getting money from a stranger is harder than somebody that already knows you. The drawback to this type of lender is the possible strain it could put between you that relationship. If your relationships mean more to you than your real estate investment, this is the loan for you.
2. Inner circles
Maybe those family members, friends, or colleagues have connections that you don’t. Ask the folks inside your network for outside referrals that may be a possible fit.
3. Attend conferences and meetings
Attending live events like conferences and meetings that investors attend will put you in the middle of investors looking for borrowers.
4. Network with real estate professionals
A critical step toward finding funding for your real estate investment is a substantial investment network. Real estate agents, brokers, title companies, real estate attorneys, and fellow investors all have experience and know private money lenders.
Investing with Private Lenders for Real Estate
Funding with a private lender for your real estate investment is fast and seamless. Usually, the process is completed within 24 to 48 hours, but you need to do the legwork first. Applying for a hard money loan isn’t as complicated and lengthy as a traditional loan, but you will need the following:
- The complete address of the investment property
- The purchase price
- The loan amount
- Your property plans
- The rehab budget
- Your estimated value after repairs
- Recent exterior and interior pictures of the property
This information will help the lender determine the ARV (after repair value) and the loan amount the property is worth. The more information you provide them, the easier underwriting, and funding the loan. Choosing the right private money lender, and having all the leg work done will help fund and close your loan faster.
Need Private Money Lenders for Your Real Estate Investments?
Since 2004, RTI Bridge Loans has funded Short Term Bridge Loans as a Direct Portfolio Lender. Working with First and Second Trust Deeds on California Real Estate, we have helped many clients with hundreds of millions of dollars loans. Because we can make the process easy and fast, our clients have come to depend on us for their real estate financing needs time and again.
With our in-depth knowledge acquired over the years, we are experienced and versed in every real estate industry’s facet. RTI works efficiently, providing prompt responsiveness with specific execution that earned us a stellar reputation. If you have a real estate deal you’re looking to fun, contact us at (562) 857-2285, and we’ll discuss the various plans with and find the best solution for your needs.