Private Lenders

8 Replies

Hello everyone my name is Jamal White and I'm new investor. I have a question regarding money lenders? What types of questions do you need to ask to make sure money lender is not a scammer?

For 98% of borrowers, the only question to ask is 'what is your NMLS number?' For the others, ask 'what are your upfront fees?'

Scammers typically ask for unusual amounts up front, well in advance of any commitment or understanding of the capacity of the borrower. Large up front fees (beyond maybe a few 100 in appraisal fees) are a red flag that they may not be legit.

Best thing to do is to talk to people that have used them before...

When you get in the game a little you can spot the BS a mile away, but starting out just know there are plenty of people trying to separate you from your money on the promise of easy riches.

Your true private lenders are people you cultivate from friends/family, etc. There are some private/hard money lenders at the REIA's, too. Just people that get what you do.

I've checked out the competition looking online, its kinda spotty, but there are some guys on there, basically just ask their rates and terms and what it takes to qualify.  Like has been said, anything more than a few hundy up front for an appraisal or something is a serious red flag.  We do $199, most wont pay for the appraisal, you'll need to.  Some ask for $2k and such up front, total scam.

I probably talk to 10+ people for every loan I do, part of the gig.

All good advice here.  Watch out for upfront fees or application fees, ask about recent deals they have actually done, ask for references from past clients, etc. 

Thank you guys for the info. This is really helpful.

Hi All,

I'm going to try to revive this thread. @Jamal White did you ever go through with using a private lenger or anyone else?

I have been seeing more posts from private lenders on my areas REI/A FB groups and they are offering 5% annual interest, it seems a bit good to be true. I don't see why they would charge only 5% when the best hard money lender rate I have seen is like a 8/2.

Do private lenders need to have a NMLS number if they state they are using their own money? 

I'll ask for references too. 

@Jimmy Nguyen If you were to follow up with any of those people offering 5% private money on FB you’d find a red flag pretty quickly I’m sure.  

Why would someone settle for 5% returns on something so risky like a newbie flipping a house.  These private guys alll act like they have zero qualifications for their “borrowers” on FB.  It doesn’t make sense. 

Totally agree with what @Alex Bekeza said.  Turn the situation around...if you had 250k or 500k to lend, would you offer it to someone for a 5-6% return on a risky real estate deal with a newbie?  I use "newbie" as a general term because those are the folks that are normally out there attracted to those teaser type rates.  What people need to realize is there is a cost to money and unless you have a stabilized asset held long term by a bank, then 5% is a dream.  The only people taking returns that low have significant amounts cash and they are in capital preservation mode.

We do a nominal fee for a credit/background check and the client pays for the appraisal.  That is pretty standard and that is all the client pays for prior to closing.  Don't ever give money up front to get approved or pay for anything else.  Get with a lender in your market who you can actually meet, shake hands with an who has a reputation to protect.  All these online lenders can have some value, but so many people get sucked in with low rates that are not reality and get taken for a ride.  Good luck.

Ok that's what I was thinking! Thanks for the insight and I'll stay away and keep working w/ hard money lenders.

Just weird because I don't get why people would try to do this since they are the ones "giving away money" and not taking it but people scam for anything these days so not surprising. 

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