I want to vet a couple of private lenders I've met in my area. I am new to investing and have after the shinny object syndrome wore off I narrowed my focus to being a flipper, or as I like to call it, a real estate renovator. The word flip or flipping I believe has a bad association with tv shows and the like.
From a buy and sell standpoint what would be some intelligent questions I should ask when meeting with a private lender? Any advice is greatly appreciated!
@Cody Stone First and foremost you should never be charged money up front...
Ask about points. Rate switches. A balloon payment. Potential complications.
If you send me an email, I'll give you my list.
Thanks @Nick Britton , when you are talking about rate switches do you mean for me to make sure the rate is fixed for the whole term? and doesn't a balloon payment basically mean the loan is "due in full" at some determined period of time?
@Cody Stone , it is a good idea to speak with lenders before you have a project but I hope you understand that while you are "vetting" them they are also "vetting" you. You may have more success if you educate yourself about your local market, reasonable purchase prices, the costs of repairs/renovations, and local holding costs before speaking with the lenders. Consider how large a project you want to tackle and how long that will take you. If you give the impression that you are a hobbyist or have not given serious thought to your flipping endeavor you may find that several of the lenders you spoke with may not be willing to lend when you need the funds or (if you find a strong enough deal) that they will lend but you will pay higher rates because your inexperience makes you a higher risk.
Thank you @Jeff Rabinowitz , message received, I plan on making the move to full time real estate in a couple years or so. I have meet with one hard money lender and would like to have a little more cushion when it comes to holding costs. On the other hand having a hard money lender or a private lender with experience in real estate can be a great asset in my mind. If a deal is no good, they won't lend on it. I've lived in the area my whole life and know the market well. My wife will have her real estate license soon to help with getting an accurate ARV. Meeting investors at the local REIAs have helped in so many other ways as well.
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