Private Lender For Investment Properties
Real estate investors spend a ton of effort to understand the market to find the best real estate investments. But smart investors have also ensured they can get money to fund the deals before they look, and a private lender is always their ace in the hole.
The reason is that private lenders are sometimes the only source to get fast money to jump on an investment property. Regardless of the type of property you invest in, banks can take weeks and even months to close. For this reason, you must understand what private lenders do, and you should develop a relationship with one before you go out and fall in love with a deal.
Understanding what they will and won’t loan against is critical, as when you know their lending factors, you’re better equipped to decide to move on a property or not.
Where to Get Money for Real Estate Investments
Private lenders are not banks. They are often individuals or small companies who have created a business around loaning money to investors. Traditional lenders often bach at these deals and tend to hesitate when lending against distressed or fixer properties. You can probably see why an excellent private Lender is so vital to your business.
Private Lender Demand In Real Estate
There is an increased demand for real estate investment cash. A private lender fulfills the need with secured loans. Borrowing from a private lender is just like borrowing from a traditional lender in most aspects. You’ll have to agree to an interest rate, time, and the terms for paying back the loan.
A private lender will charge significantly higher rates with shorter repayment terms. The property secures the loan, and like any loan, if you don’t make your payments, the lender will foreclose on the property and take possession to mitigate their loss due to your failure.
Now you can see why a private lender would focus more on the property value and potential for return versus an individual’s ability to qualify personally.
Differentiating Hard Money Lenders from a Private Lender
Unlike hard money lenders, private lending is more based on relationships with fewer hard and fast rules.
It pays to build a good relationship with a private lender like Abbey Mortgage. When you leverage private money, you’ll be able to close more deals because you have access to capital when you need it. Smart investors don’t rely on the local bank to loan you investment capital because it is a losing proposition.
When you work with private lenders, showing them you can perform and that they can trust that you’d repay their loan with a strong return on their money makes these deals go smooth. We want to do deal after deal with investors like this.
For the lender, it means a safe, easy return on their money. For the investor, private loans give assurance that you move on a deal because you know that you can get funded. Many investors will use the same private lender over and over. After all, once you’ve developed a win-win relationship with a lender, the loans are easy to get for future deals. The investor makes money through fees and interest, and you can now leverage the funds to increase your ability to buy more properties.
How to Find a Good Private Lender
There is an easy answer to this question. You can simply pick up the phone and call us. However, with private money mortgage lenders, you may want to take a couple of things into consideration.
- Is the lender knowledgeable about real estate, especially in your market? Working with someone who knows and understands your area’s real estate market will put you ahead of the game.
- Can I work with the lender, and do they understand and care about my business goals and value my track record? Again, experience with a lender is ultra-valuable, making it much easier to do future deals.
What Private Money Mortgage Lenders Want
For starters, it might be best to discuss what they don’t want. Private money lenders don’t want a bunch of BS hassles, and they hate to foreclose on deals. The fewer difficulties they have, the higher their earnings will be, and the more they’ll want to work with you on future deals. They want to be a lender who earns an excellent return for taking the risk involved in lending on your property.
- Most lenders will want to see the purchase contract for the property.
- For a fixer-upper property, be ready to show photos.
- Provide a summary of the deal that includes the purchase price, renovation costs, and comparable supported After Repaired Value or ARV.
- If you’re new to working with a lender, they may want to understand more about your contractors, property managers, and any other people involved.
The best thing to do is put yourself in the lender’s shoes and ask yourself if you’d loan someone the money based on the deal you’re presenting.
What are the Pros and Cons of Private Loans?
So far, everything sounds pretty good. However, as with anything in life, there are pros and cons to consider.
Pro – Easy Qualification
First off, working with a private lender means that you need to provide information to demonstrate that you’ve got a sound investment that will be profitable and that you’ll pay off. When you have this, you have a win-win deal, making it a slam dunk deal for most private lenders, presenting far fewer hoops for you to jump through.
Con – Considerably Higher Interest Rates
A private lender like Abbey Mortgage will typically charge interest rates higher than you’ll get from a bank. However, this is often a moot point if you can’t get approved with the bank. The math is simple; nothing from nothing is nothing. If the property and profit are worth it, then the increased interest is also worth it.
Private loans allow you to invest in deals that you might not otherwise be able to move on.
Pro – These Loans are Investor Centric
Private lenders understand what you’re doing, whether to purchase, refinance, or rehab a property and therefore, they will base everything on after repair value or ARV. More often than not, they’ll lend you all of the money you need to achieve your investment goals.
Pro – Get Money Fast
Fast approvals and closings are enormous as real estate is very competitive. Time often means he who has the cash wins!
It’s possible to get a deal funded in days versus weeks or months using a private money lender. Using the right private money lender creates less burden and makes it easier to decide whether or not to invest.
It’s Time to Make A Call To Abbey Mortgage!
Abbey Mortgage is a great choice to be your private lender! We offer many advantages to real estate investors, including frank advice on whether a deal makes sense. Once we have built a relationship based on a track record of performance, it will be easy to do it repeatedly. So pick up the phone and call Robert at Abbey Mortgage or apply online today!