Does investors get private loans to purchase and also for rehab?

4 Replies

@Shera Gregory and I were discussing this same thing last night at my Meetup! It's tough if you're brand new, because the lenders a big risk on you, and you don't have any skin in the deal. It's not impossible, but you need to have an absolutely amazing deal. Would you agree Shera?

@Jerry Bettis Yes, but personally I've found it easier to get both from one lender as the lender will have a 1st lien position. Lots of banks and HML's offer purchase + rehab financing in one loan.

A true private lender is someone you know, like a family member or friend, and yes, that's possible too.

I agree. If as a borrower you can't bring money to the deal then you need to have a really good deal and also a very good idea of exactly what the rehab is going to be, who's going to do the work, what's it going to cost. It would be a good idea to show who your team members are. That's not just your contractors but also the title company, your insurance company, heck even whoever is going to clean it when you're done. The more you can show that you've thought this through the more comfortable the lender is going to be.

I will double what @Shera Gregory said. 

Now if you dont have a super duper deal, but it will make you some money, get a hard money loan. Convince someone from the REIA that you belong to (you must network and meet people) to put up the 10% that you will need to bring cash and split the deal with them.

Personally, when I started I found super deals. Hard money would lend me 100% of the deal and 100% of the rehab. I paid 18% plus 3 to 4 points all rolled into the deal. BUT when finished I had very little if anything into the deal and I would walk away with 20k to 30k per deal after 3 to 6 months.

Nowadays, same situation, but I pay 8-10% and 1 point if any points. Just takes some experience in completing successful deals.

No one is going to lend you 100% on your first, second or probably even third deal at 10% interest rate. If someone does, its probably a scam.