Let’s distinguish the difference between Hard Money Lenders and Private Lenders. The terms are interchanged, but there is a difference.
Private Lenders are individuals who lend money to projects. These are generally people you know family, friends, people you have met at REIA meetings, meetups and real estate events. There rates are anywhere between 8% - 10% sometimes a point or two.
Hard Money Lenders are loaning you Money with less strict requirements then traditional lenders but the rates will be 12% or higher and 3-5 points. Hard Money Lenders also promote themselves as Private Lenders as well, but there is a distinction.
To answer your question yes, in general Private Lenders have less strict requirements. They are more concerned on the quality of the project. They are also investing in you. Having a good track record is as important as the deal. If you don’t have a track record you can partner with someone on your first deal to build up your credibility.
Lender · Frisco, TX · Member since 2019 · 546 posts · 270 votes
6y
Do you mean private lender as in a hard money lender? Or a private lender that does your typical Conventional, FHA, VA, USDA, etc? A private lender that does your Conventional, FHA, VA, and USDA loans tends to have better rates, better turn times, and better knowledge of the loan programs. I hear more horror stories than not of people going to the big banks for their loans (Wells, Chase, etc.). It's like having a general practitioner perform brain surgery instead of a brain surgeon. The big banks are more focused on their clients' banking and other services than they are mortgages.
Let’s distinguish the difference between Hard Money Lenders and Private Lenders. The terms are interchanged, but there is a difference.
Private Lenders are individuals who lend money to projects. These are generally people you know family, friends, people you have met at REIA meetings, meetups and real estate events. There rates are anywhere between 8% - 10% sometimes a point or two.
Hard Money Lenders are loaning you Money with less strict requirements then traditional lenders but the rates will be 12% or higher and 3-5 points. Hard Money Lenders also promote themselves as Private Lenders as well, but there is a distinction.
To answer your question yes, in general Private Lenders have less strict requirements. They are more concerned on the quality of the project. They are also investing in you. Having a good track record is as important as the deal. If you don’t have a track record you can partner with someone on your first deal to build up your credibility.
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
6y
@Rada Vassileva when I have borrowed from several friends and relatives, NO ONE has ever asked me for tax returns, pay stubs(because I did not have a job anyway), or even a credit check. They knew that I had been buying, fixing and selling properties for years and made money doing this. Several people asked to see the house and asked questions about purchase price, repairs and sale price, but that's it. They were satisfied with my ability to complete the project and that they would get their money back because I had purchased the property WAY below market price. Also I have a track record for buying and selling properties.
Orange County, CA · Member since 2020 · 23 posts · 6 votes
6y
Thank you Elise Marquette, Kenneth Garrett and Rick Pozos! I always thought hard money and private lenders are the same thing. They usually represent themselves as Private Lenders. I'm a total newbie and need to learn a lot, including the lingo. @RickPozos, you are lucky to have friends & relatives to lend you money :) Thank you again, guys!
Lender · Hackensack, NJ · Member since 2016 · 1k+ posts · 372 votes
6y
Strict probably isn't the best phrase to use, just different criteria HML are mainly focused on the asset. They do have min FICO requirements and liquidity requirements, but for the most part the deal is going to be based on the asset itself. If the numbers make since and it is in a good area then the funding process can be a lot less stringent than a typical bank.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
6y
@Rada Vassileva As mentioned above, private lenders (friends, family) aren't as strict, but generally charge higher rates. usually for me it's in the 10% range. So if you're looking for long term money, banks at 2.75% for 30 years fixed will be unbeatable and generally the best path for long term rentals. You certainly don't want to pay over 3 times the going rate (10% vs 3%) if you don't have to!