Help, how do I find private lenders?

Question

I have been Google-ing private lenders in the Milwaukee Wisconsin area and I cannot find any.  Do these type of lenders operate out of offices?

Are any lenders willing to lend for 30 years?  Or are they balloon payments of all interest till I find conventional financing?

Thanks

Jon Holdman · Answer

But don't give up on long term.  Probably not a 30 year fixed like a bank, but its certainly possible to find someone who's currently investing in five year CD's who might give you five years or more.  A bank CD with monthly payments is equivalent to an interest only loan.  The difference is risk.  Your deal could go bad.  You probably can't cash them out on demand like a bank CD.  But if someone is getting 2% on a CD they might be willing to invest in your at, say, 6-8% for five or 10 years.  Offer a 30 year amortization with a balloon payment.

Michael Dombrowski · Answer

Thanks for the advice guys.  I didnt know private lenders preferred short term loans.  It makes all the sense in the world as to why.

Jill Banner · Answer

You may have potential investors right in your back yard.  Many people do not know that they can use their IRA for private mortgages.  If you know someone with an IRA you can connect them with a self directed IRA company and help educate them on the benefits of using their IRA as a private mortgage.  Most of these deals are short term and we are seeing rates at 12-14%.

Jon Holdman · Answer

If a lender or broker is advertising "private money", they're pulling your chain, IMHO.  They're a hard money lender or broker.

Private money is someone you know.  They're private.  Its just a person who has some cash who's willing to lend it.  Will Barnard is right on the money (ha!).  Talk to people you know and people you meet and, as surprising as it may sound, eventually you will find someone who will be interested.

Now, some companies offer lists of people who might be willing to lend.  I know show of the companies that do SDIRAs do events and have lists so they can try to connect their account holders with potential investments.  I have no idea if this process is effective, but I know it exists.

Another alternative is to try to run in circles where these people might hang out.  Here's a hint - its probably not at a REIA.  By and large the people there are looking for money.  The few people there with money to lend are very well aware what their money is worth and will be right up there with hard money lenders for terms.

Private lenders may well be willing to lend for a long term.  Or maybe only a short term.  The terms are negotiable.  Its very unlikely, though, that you'll get bank rate financing with bank terms from a private individual.  Anyone with the financial savvy to accumulate an interesting pot of cash is savvy enough to know their money is worth more than bank rates.

If you're looking for 30 year fixed rate real estate loans, you really have to be dealing with banks.  Use conventional loans as long as you can.  Those are the best rates.  If you max those out, find a portfolio lender.  They may not do 30 year, by they may do 15-20 year fixed on single family properties.

Hard money, OTOH, is generally short term.  You use it to acquire and fix up a property and get it rented so you can refi into long term financing.

Corey Dutton · Answer

There are very FEW hard money lenders in WI. There are some States where HMLs are scarce, and Wisconsin is one of those States unfortunately. If you find a GOOD hard money BROKER located in WI, they've already done all the hard work of filtering all the bogus hard money lenders from the REAL lenders. But find a dedicated HARD MONEY BROKER not a traditional mortgage broker who does mortgages on homes. A traditional mortgage broker is just going to send it to a Hard money broker anyway, so you'll have to pay 2 fees.

Also, watch out for Hard money lenders who claim to lend Nationwide. Those are usually bogus. A good way to tell if it's not real is if they issue you a term sheet or letter of intent right away and then ask for a fee right  along with it !!

Check your local online classifieds under Financial services, look on Craigslist under real estate services or financial services. Also, do a search on LinkedIn under 'People' and search for 'hard money lender WI.' Again, watch out for lenders that are not based in WI and give you an approval right away.....

Shane Woods · Answer

To expand on part of Will Barnard's reply,

"Private Lenders" quite often can be people you know.  Hang out here awhile.  Learn everything you can possibly learn about whichever direction you want to go in real estate.  You'll know when you "know enough" to have a conversation about it.  Once you understand how YOU are helping THEM, you'll be ready to approach people you know that have money, and have that conversation.  That's exactly what I did, and I have a PI lined up to fund my first deal up to $100K, and see where it takes us.

It's just a guy I work with that has some investment money he moves around from time to time.

Will Barnard · Answer

Michael, what you are referencing is hard money lenders and like Loc stated, they do not have 30 year loan programs. Some will now do longer terms like 10 years (only one I know of here in CA).

Private lenders do not operate out of offices, etc. They are individuals with self directed IRA's and/or 401k's, cash, stocks, money market accounts, etc looking for alternative investments. RE is one of them.
You find them by talking to people and letting them know what you do and what opportunities you can offer.
Even with private money lenders, they will likely not lock up a 30 year loan!

What do you need the money for? What is your investment strategy?

Loc R. · Answer

No private lender in their right mind is going to lend for 30 years.

HMLs are typically 6-month loans that are I/O, with extensions available (at a price).