I am investor in flips and multifamily properties. I have run all my projects through hard money lenders to date but want to see who has worked with private money lenders to determine what is different from the hard money companies I have worked with in the past.
Lender · Syracuse, NY · Member since 2016 · 165 posts · 92 votes
7y
@Eleanor Curry If you can imagine a HML on the left and a traditional bank on the right private money lenders can fall anywhere in between. The differences are typically better rates than HML, more aggressive LTV/LTC, and more access to capital. Loan programs vary widely but expect more paperwork than a HML but often not even close to a bank.
A true private lender is someone you know. They are private. They don't advertise. The moment they advertise, they are really just an HML. They typically have less cash than an HML because they are one individual. Most HMLs have investors in a slush fund. To get a good deal, you should have a relationship with the person. They offer lower interest and can be a little more flexible on terms. If you don't know someone already with cash, start telling people at REI meet ups that you are looking for financing and you may be able to get in touch with someone.
@Ryan Blake As the best rate is with someone you know personally do you think there is any merit for companies that advertise list of individuals interested in private lending?
Lender · TX · Member since 2018 · 936 posts · 713 votes
7y
@Eleanor Curry I can't really attest to those companies as I have never done a deal involving them. I try to keep out of spaces I don't know too much about. I know they are popping up. Do I think there is merit in them? Yes??? If done correctly, sure it could be very beneficial for someone who is not able to qualify for a conventional mortgage. They tend to have lower fees and interest than an HML but they require more documentation, more time to close, and most of the time a higher down payment (between 15% and 20%).