Private Lenders for buy&hold rentals

6 Replies

     Hey guys, one thing that I am struggling to figure out is how private lending works and how I can utilize it to benefit both parties in a buy & hold scenario.For example, when purchasing a property, you as the buyer have (X) amount for your own contribution, and you will need to find the additional funding to put (X) percent down on the property. Now, once the money is in hand and the purchase has gone through, how can I assure the lender will get his or her money back on top of their charged interest in their requested period of time (6 months-5 years) and, at the same time make sure I am cash flowing at a number that makes sense to me and my investment.

      I have no desire for flipping at this time due to my local market but do see some potential in long term rentals. I am unable to get a bank loan due to the building of my credit and my short job history of about 6 months (Just graduated high school) but do feel fully capable of acquiring the knowledge and drive needed to complete my first real estate deal. 

     Any advice helps and I would love to hear your guys's imput and previous experiences in dealing with private lenders. Thank you for your time!

Ryan Soldano

I was in the same situation with a property in atlanta and in miami. banks wouldnt work with me, so i found Birchwood Loans to be good to work with. i put 40% down and they financed the rest without broker fees. I refinanced with a bank 2 years later and now do very well on both homes.

@Ryan Soldano

Usually private lending is short term money. So you buy with hard money or private money and then refi in a year with a bank. A bank is happy to take 4.5-5.5% on their money long term an individual usually isn’t. If you can find a seller with a property you want they may seller finance.

@Ryan Soldano Have you considered commercial lending? Where they underwrite the property and not you?  You would have to personally guarantee this early in the game, but maybe you find someone to cosign with you (provide the credit and reserves) and you give them part of the return with none of their money in.  Just a thought.  I know of a couple of lenders that could work... let me know!

Originally posted by @Ryan Soldano :

     Hey guys, one thing that I am struggling to figure out is how private lending works and how I can utilize it to benefit both parties in a buy & hold scenario.For example, when purchasing a property, you as the buyer have (X) amount for your own contribution, and you will need to find the additional funding to put (X) percent down on the property. Now, once the money is in hand and the purchase has gone through, how can I assure the lender will get his or her money back on top of their charged interest in their requested period of time (6 months-5 years) and, at the same time make sure I am cash flowing at a number that makes sense to me and my investment.

      I have no desire for flipping at this time due to my local market but do see some potential in long term rentals. I am unable to get a bank loan due to the building of my credit and my short job history of about 6 months (Just graduated high school) but do feel fully capable of acquiring the knowledge and drive needed to complete my first real estate deal. 

     Any advice helps and I would love to hear your guys's imput and previous experiences in dealing with private lenders. Thank you for your time!

Ryan Soldano

 30 year fixed institutional money with no income verification is available in the 5's and 6's. All money is cheap right now. 

It is important to build a network of specialists to help you with your real estate investing.  A private lender, traditional banking (fannie/freddie) lender, and a commercial lender are great assets.  It takes time to find the right persons to help you meet and grow your real estate portfolio.

Being intentional, having a strategy you can find a property and look for the best way to finance investment property.

Fannie Mae/Freddie Mac no longer have seasoning requirements. This is important because you can now find a property that you are buying under value because it needs a lot of repairs or a seller is in distress needing a way to not have the home foreclosed. Use your private money lender, remodel the home, rent it, and refinance it... BRRRR

The traditional lender can come in and refinance you out, sometimes including some of the remodel monies depending on how the private money is set up.  This can happen immediately; once the home is remodeled.

Commercial lenders are good because they can do some loans that traditional lenders may not.

Each relationship takes time to find, create, and build to the point you have a team helping you when you are in need.  This lending team is good to run investment property scenarios through to make sure you are keeping on track with your goals and the specific investment is a good buy or the numbers will work.

Tim

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