Private money question

1 Reply

From what I'm seeing, Wholesalers typically will not work with a conventional loan structure due to the quick closing process, how fast deals go and most investors with 10+ doors have an LLC. I have private money access so here is my question. If I use private money to pay cash on a wholesale deal and I agree to pay 6-11% interest to the lender over 1 year, when I go to refinance through either a portfolio lender or small biz loan, will banks pay off a private money loan? I'm in the Dallas, TX area. There could be a lot of side discussions with this post (other funding alternatives, how to pay back a private lender and normal duration, LLC convo, etc.) I appreciate the input. The main driver is I work with a private lender who wants to be in and out of deals and not tied to the property for years. Thanks!

Hey Matt - using private money or hard money to buy a home, then refinancing with a bank loan is a very common process. The bank is going to underwrite the property, and depending on the institution will also underwrite you as a borrower. If they are happy with that, it doesn't really matter that you use the funds to pay-off the private lender. In fact, it will be required as the private lender will need to release their security over the property.

If you're using another line of credit (e.g., business loan) to pay off the private lender, that's typically fine too, although you just want to double check the terms of the line of credit and be mindful of things like not using one LLC's line of credit to pay off another LLC's debt.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here