Private Lenders

9 Replies

Hello BP, I have a question about private lenders. My Question about private lenders is, are they just regular people that you know that will lend you money to buy investment properties, or are they people that specialize in that, that I can seek out to help with financing without using a bank for higher interest rates of course, or are they the same as hard money lenders, or all of the above? If they are people that specialize in just that, how do I go about finding these people as well? 

as far as I know, hard money lenders are private money lenders. the one I use loans from a self directed IRA. No bank qualifying and yes, higher interest rates. I met my lender looking for loans. now, if you have a rich uncle that loans you money to invest,he would be a private lender but not a hard money lender. I could be totally wrong but that's how I understand it

@Arthur L. Timmins Jr.

Generally, private lenders and hard money lenders are individuals, whether using personal or self-directed retirement funds.  Some hard money lenders are run professionally as funds.

The key difference is the rates.  "Private" money is generally a relationship that you as the investment provider create, and will often be at a lower rate.  "Hard" money gets it's name from the terms - generally several points up front and steep interest - best used for short term purposes when other lenders such as a bank will not look at a deal.

The goal of all smart real estate investors is to create several sources of private money, and the way to do that is to network, network, network...  and create great investment opportunities.  Being able to demonstrate a track record is also helpful, but of course that takes time.

Your local real estate investor club will be the best place to get started.

All of the above.  Private lenders come in all shapes and sizes, some are sophisticated, some are not.  Some will charge points, some will not.  It just depends on who you are talking to.  You can purchase lists from vendors that advertise a list of private lenders.  If they are on that type of list, they will probably be hard money lenders (higher interest and points) or sophisticated lenders (private individuals lending out at hard money rates and terms).

The best private lenders are those you meet or know from within your inner circle.  Those are close family and friends.  Outer circle consists of people who know your inner circle.  Word of mouth and just telling people what you do is one of the best ways to find true private lenders.  

Additionally, type "private lenders" into the search bar and start reading up on previous threads and blog posts, there are a ton of them that will help you get familiar with the topic.  

Generally I do not consider Hard Money Lenders as private lenders. To me they are a distinctly different category. Hard money lenders are in the business of lending money. They are professional lenders. That is generally not what most people are looking for when they talk about private lenders.

I consider private lenders, as friends family and associates that lend to you because the trust YOU. They are not professional lenders. They lend to you because they trust you to bring them a better return than their other options.

Hi Arthur,

Private lenders are usually not in the business of lending money the way a hard money lender is.

Private lenders are individuals that have extra funds and want to partner with you. Please make sure and contact an SEC attorney before raising any funds. This attorney can make sure that you are in compliance with all the securities laws and that you won’t get yourself in trouble.

I would only work with an accredited investor. Non-accredited investors often times don’t have the experience level of an accredited investor.

An accredited investor has a net worth of over $1 million or an annual income of $200,000 a year or more.

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