Here are a few things to look for in researching private money lenders:
- LTV/Term/Points/Interest: these are all fairly straight forward, the more private the lender is the more negotiable they may be, especially if you have a good deal with clear comps and exit strategy.
- Junk Fees: make sure to ask about all other fees associated with the loan. At least in California, where the private lending industry is very competitive, most lenders charge around $3k in unnecessary fees, all can be avoided. There shouldn't be more than a few hundred for doc fees.
- No Prepayment Penalty: make sure there is no PPP, as these investments are very hard to predict an exact time frame. All lenders should want their money back asap, so they shouldn't be requiring a prepayment penalty - or prepaid interest.
- DIRECT Lenders: maybe the most important, make sure you are dealing with the actual check writer and that no one else has to approve the loan. Direct lenders should be able to close within 5 days on the majority of deals. If they aren't direct, there is more chance of the financing falling through.
Hope that helps!
Best of luck to you.
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