Los Angeles, CA · Member since 2015 · 3 posts · 1 vote
I can't qualify for a conventional loan because I'm a small business owner with less than two years of tax returns. So, I'm looking into private lending. I understand the rates will be higher, but I obviously would like to get the best rate possible. What is a "good" rate on the private side?
FYI, my strategy is buy and hold turnkey rental properties with management included. I'd like my real estate portfolio to be as passive as possible.
Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
10y
I have heard of stated income loans making a comeback of late, but this may just be a rumor. You may try speaking with a mortgage broker in your area just to check. Bank portfolio loans would be worse than conforming loans, but certainly better than private loans. The trouble with private loans is that they're likely to have shorter durations as well and thus you'd be subject to more interest rate and refinance risk. The classical road to bankruptcy is financing long-term assets with short-term money.
You may try looking into doing subject-to purchases and structuring your cash reserves or access to capital to refinance the properties in the unlikely event the notes are called
Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
10y
I have heard of stated income loans making a comeback of late, but this may just be a rumor. You may try speaking with a mortgage broker in your area just to check. Bank portfolio loans would be worse than conforming loans, but certainly better than private loans. The trouble with private loans is that they're likely to have shorter durations as well and thus you'd be subject to more interest rate and refinance risk. The classical road to bankruptcy is financing long-term assets with short-term money.
You may try looking into doing subject-to purchases and structuring your cash reserves or access to capital to refinance the properties in the unlikely event the notes are called
Lender · Draper, UT · Member since 2015 · 74 posts · 25 votes
10y
There are lenders that offer 30/30 loans on rental property. Rates start in the high 5's with no DTI. Main factors are LTV, DSCR, credit score and loan amount.
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
10y
Private money is whatever you can negotiate. I know a guy that gets private money at 4%. To pluck a number from air, I would guess 8-10% would be pretty common
Hard money on the other hand, which I can side distinct from private money tends to be 8% at the low end to 15%. Expect to pay 2-5 points on top of that. may area would tend to be at the higher end of that range some areas are lower.
Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes
10y
@Jeff Mihaljevich I am self-employed as well. Private lending is something I have done for a few years alongside investing in buy and hold rental properties. I was always previously paid 10%, which is a minimum for me now. Those loans ran 12-24 months. I currently have a loan out - very short term of 2-3 months - that will pay a rate of 24% (2% a month), plus a couple of points. Now that is certainly is an awesome return, but totally unexpected, and not something I am likely to see again anytime soon, if ever. All loans have been backed by mortgages (liens) against real estate.
Now I mostly transitioning my lending money into real estate, and I recently came across a way to combine the very passive (and cash only requirements) of lending with the advantages of owning real estate. It involves a crowdfunding platform in which I buy into a portfolio of 10 rental properties the managers already own. I co-own that portfolio with the managers, as well as other participating investors. The company is really young, so there are some cautions there, but they seem to be on a track to grow organically and quite quickly, eventually adding an additional portfolio every month. Ongoing cash flow is running around 11%, with the overall returns (IRR) are expected to be in the mid- to upper teens, after a 3-5 year hold. They are opening an additional portfolio this month and I plan to add to buy into that one as well. What I really like about this is the diversification, and that the managers interests are nearly completely aligned with me (the investor).