I have a question about private and hard money lenders. I have heard that usually these type of lenders tend to lend money mainly for flips or rehabs. Is that true? Do they ever lend for investors who want to buy and hold?
Can someone give their experience on how they got these types of money to purchase rentals?
Thank you very much! I appreciate it.
@Hermilo Garcia , the HML's I know in my area would not lend on this type of investment because they do not allow anyone to live in the properties they fund. As for private lenders, that's a different story since they are individual people who may be happy with the arrangement you propose as long as their investment is secured and they receive the return you promised.
I would think that the rates you would pay a private lender would make the investment a loss since you're going to be paying a higher rate. You might consider using a private lender to acquire the properties and then get conventional lending from a bank on them after you've owned the property for six months.
There may by private lenders in your area that are set up for long term hold. You will probably have to look around since short term is more common.
I have had hard money loans on apartment properties in the past. It has to be the right deal though. There is a lot of cheaper funding that HML's. Those resources should be looked at first.
If the deal makes sense, you can get funding.
Hello, and thank you for your response. Do you think you could do me the favor of explaining how your previous deals with hard money lenders have happened? Do they usually expext you to pay within a few years, or can some lenders allow you to pay back your loan in the span of 20 or 30 years? I really appreciate your help.
I am sure that there are HML that would love to loan you money for a long term. It does not make sense for you though.
Hard money is intended to be high interest rates for short term loans. I used mine to purchase a non-performing property, fix it up, fill it up and sell it. Conventional lenders want to see operating data that supports the loan. I could have gotten the property filled with tenants and then financed through a conventional lender. Why would I keep paying 15% interest if I could pay less than 5%?
I feel that I may be able to help answer your question. Yes, they do lend on buy and holds, but it has to obviously depends on the lender and the parameters they have set. If you can get bank financing, that would be ideal, but I understand that this is not always the case. I know of some HML lenders that would do a buy and hold with a fixed rate of say 8 years and have the loan amortized over 30 years at a rate of 8%. So yes it is available out there.
@Hermilo Garcia in regard to your question, I have done it once, however I still used a private lender, not a bank. Back in 2007 I bought a property with all of my own cash and after six months I refinanced it with a bank. I was able to pull all my original money out and a little extra. I understand this is much harder to now.
If I was to consider doing this again I would contact a local bank in the area you are working in and find out what their guidelines are to refinance an investment property and then work to that end.
I see. Thank you very much for your help. I really appreciate it! Good luck in you endeavours.
Thank you very much! I guess it all depends on the lender. I will definitely keep looking, and hope to come in contact with some soon.
If I may, do you lend to investors who are trying to buy and hold?
If so, can you give me an example of what you would base your decision on to lend money for a rental property?
I understand. Thank you very much!
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!