We are new real estate Rehabber in the Youngstown/Boardman, Ohio. We are looking to try and find some private lenders and need some advice on how private lending works before we do so. Would love any advice or ideas that you guys may have. Thanks!
Know what is competitive. Contact Hard Money to know what you don't want to pay.
Know what to ask for. "I am seeking ___ for _______". Being very specific shows that you know what you're doing. If you research enough to be specific... you will.
Know what to do if they say yes! Title companies that are attorney owned AND specialize in closing transactions for investors can be a huge help. They will help you place the money in the deal and correctly close.
The attorney at that title will be the one to go meet. Let him know what your doing, ask for hand holding. Let them know that you are happy to close all of your deals with them if they can help you learn this aspect of the business. They will help because your closings are their oxygen.
IRA custodians also have a wealth of information on the topic.
Consider small local banks as well. I've had good success getting both purchase and rehab funding, at very reasonable rates (5% range, which may be hard to obtain with private lenders).
You said that you are a new investor. Does that mean you have rehabbed houses or you are looking to rehab houses? Either way, there are private lenders and hard money lenders here on BP. From my experience, (and everyone is different), I really don't care about the interest rate that hard money lenders charge If you know how to negotiate like a pro, you will be fine with what ever the rates and points are for you to complete the deal. It's far more important to have access to the funds to close the deals. As a mentor once told me, you can't be broke and greedy! That was a gem that I quickly stored in my memory. It changed the way I thought about making money.
I hope this helps and makes sense.
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I use and broker both. Private money comes from a lot of different places. My main one is my roommate who is pretty loaded, I have some of my dad's money in play too. My real estate agent actually saw me paying my lenders and asked if she could loan me money. That stuff tends to snowball, they brag to their buddies about how much they are making.
I'm with the people above, its not the cost of the money, its the availability of the money. To a certain extent, of course. The hard money guys can price the deal out making sense with some of the points and rates and participation they require. Lately I've been borrowing the bulk of it from institutions and the participation (down payment, payments, etc) from Private Lenders. I usually only have my money in a deal if it goes over budget (which is pretty much every time)
If you do find private money, its pretty easy to do the paperwork and such. I do my own, but I'd suggest using an attorney to close the transaction and would myself with anyone I didn't know real well. I literally get hundreds of thousands of dollars from my people and do the paperwork later, but there's strong relationships there.
Anyway, the proper way to do it is to have them send the money to the atty, he attaches a lien to the property at closing just like he would do for a bank. If you use an atty you'll sign more than two things, but really all you need is a note outlining the terms of the loan, and a security deed (or deed of trust, depending on where you are) giving notice that there is a lien on the property for the amount.
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