Private money lenders: 10 tips to find them fast for real estate deals
Also, private money lenders are individuals or companies that lend for real estate investments.
Because they aren’t bound by bank rules, they can approve loans quickly and tailor terms to a deal, which makes them a favorite of flippers, wholesalers and landlords. Here are 10 practical tips to find, vet and keep them.
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Tip 1: Understand how private money lenders work
In addition, private money lenders fund deals with their own capital or a private fund, usually secured by the property.
Unlike banks, which focus on credit scores and long approvals, they care most about the property’s value, your plan and your ability to repay. As a result, approvals can take days instead of weeks.
In general, that speed has a price: higher rates, points and shorter terms. Overall, private loans therefore work best for short projects, such as flips, double closes and bridge financing until a refinance.
| Bank loan | Private money loan |
|---|---|
| Strict credit and income rules | Focus on the deal and borrower |
| Weeks to approve | Days to approve |
| Lower rate, longer term | Higher rate, shorter term |
Benefits of working with private money lenders
Used wisely, private money helps you win more deals and grow faster:
Generally, private money is a tool, not a shortcut. Also, the deal still has to make sense after financing costs.
Tips 2 to 4: Build relationships and trust with private money lenders
In addition, private lending runs on relationships, because lenders invest their own capital. So the more visible and credible you are, the faster money follows.
- Tip 2: Network where lenders gather.
In general, meetups, investor associations, conferences, title companies, agents and attorneys all know who funds deals.
- Tip 3: Show your credibility.
Overall, share your goals, experience and a simple deal summary with photos and numbers.
- Tip 4: Earn trust and keep it.
Generally, communicate often, repay on time and handle problems openly. Also, reputation compounds into faster approvals and referrals.
Tips 5 and 6: Compare loan terms and know your costs
In addition, tip 5: look at the total cost, not just the rate. In general, tip 6: make sure the deal can carry it.
| Item | Example on a $200,000 loan |
|---|---|
| Points (2%) | $4,000 |
| Interest (11% for 6 months) | $11,000 |
| Other fees | $1,500 |
| Total loan cost | $16,500 |
Hypothetical example. Overall, subtract the total from your projected profit; shorter projects mean lower interest.
Remember, speed has value. Generally, a loan that costs more but closes in days can win a deal a cheaper bank loan would lose. Still, read the fine print on loan-to-value, renovation funding, draws, extensions and default terms.
Tips 7 to 9: Vet private money lenders before you sign
Due diligence protects you as much as the lender:
Also, ForeclosuresDaily.com customers can also access approved vendors through our marketing toolbox, including EquityMax, an approved private money lender.
Questions to ask every private lender
Tip 10: Have deals ready before you need money
Lenders fund deals, not ideas. In addition, a steady supply of motivated seller leads means you always have a project to present. In general, package each deal clearly and get pre-approved by a few lenders early. As a result, you can make fast, strong offers.
What lenders want to see
Motivated sellers looking for a fast sale
Overall, every major distress signal nationwide is covered on the ForeclosuresDaily.com off-market platform, cross-checked against tax rolls and property appraiser records.
Private money lenders: FAQ
What is a private money lender?
Generally, an individual or company that lends its own capital for real estate deals, usually secured by the property.
How is private money different from a bank loan?
Also, private lenders approve faster and more flexibly, but usually charge higher rates and fees with shorter terms.
Where can I find private money lenders near me?
At meetups, investor associations, conferences, title companies and through agents, attorneys and approved vendor lists.
Do private lenders check credit?
In addition, some do, but most focus on the property, the numbers and your track record.
Should loan terms be in writing?
Yes. In general, always use a promissory note, a recorded security instrument and clear terms.
Related guide: first-time real estate investor guide.
Find the deals private lenders want to fund
Overall, Understand lenders, build relationships, vet partners and always have a solid deal ready. Generally, ForeclosuresDaily.com helps you find those deals first.