Any private money out there? Share your experience with me!

8 Replies

Can anyone share their experience with private money? What has your experience been with rates, prepayment, etc etc? Whats the best way to find a private investor?

How does this compare to hard money lenders?

Any help/response is greatly appreciated!

Originally posted by @Patrick Nickerson :

Can anyone share their experience with private money? What has your experience been with rates, prepayment, etc etc? Whats the best way to find a private investor?

How does this compare to hard money lenders?

Any help/response is greatly appreciated!

 Hello, Patrick, I deal with both. The few differences I find:

Private Lenders:

1- Will run out of money (some). 

2-They can be picky about what/where they lend too. 

3-They can be easier to deal with and underwrite the loans.

4- Some can be sketchy and you don't know really who you are dealing with.

Hard Money:

1- They can source mone, they pool investors in.

2- Low limitations on where and what they lend against is more about the deal and the property.

3- Underwriting is systematic and you can know what to expect ita bout the numbers and it all basic. (ARV, LTV, Appraisal Financials)

4- They are institutional and professionals in what they do. (its a business)

Rates and terms between them are the same in general terms. 7.99-13.99% LTV 90-65%. Most will ask for points but never upfront all at closing.

I've heard of the low ball - 100% LTV private money but if I do find one I'll be selling his money on my deals and have not had one come across my deals yet.

Originally posted by @Patrick Nickerson :

@Guifre Mora awesome information! Thanks for responding! You sound well versed in this area? 

In your experience have you ever seen hard money partnered with 506b/c funds?

 Not directly I know of some lender who syndicate this way but I suppose its a way to raise funds from accredited investors. Every private lender can work in different ways to raise capital as long as they follow certain rules. There are workarounds for example of an exempt transaction is where a private lender loans money to an investor to purchase real estate using a promissory note and mortgage or deed of trust secured by the real estate. As long as investor funds have not been “pooled” or the note has not been “fractionalized” by combining investor funds to make up the total loan amount, this may qualify as an exempt transaction. 

@Patrick Nickerson

If you're looking to bring capital to the syndication deals, you have to start building the relationships long  before you have a deal. Just like in personal relationships, the professional ones take time, commitment and dedication. Things will not happen overtime. Professional "courting" if you will, is required. An alternative is to partner with someone who is skilled in that arena.  

If you do plan to explore on how to raise money for  your syndications, here're a ideas:

https://www.biggerpockets.com/member-blogs/10850/75569-care-for-your-investors-like-mom-cares-for-you

https://www.biggerpockets.com/member-blogs/10850/84894-where-can-i-find-investors

@Alina Trigub great reads! Thanks for the resources! I’m sure I won’t be the only one that benefits from your share - at first glance both of those appear to be great articles. I’ll have to sit down and read through thoroughly this evening or weekend!

@Patrick Nickerson

I am a private lender, and I can tell you a bit from my side of it. We are easier to find than you think, here are some recommendations:

1) Go to people that know and trust you for other reasons, they'll be your best bet to get things started.
2) Shorter turnaround and lower risk than equity often opens you up to a new batch of lenders, particularly more risk-averse types that live on a fixed income from investments. This is a very large group of people we don't hear about a lot on this forum.
3) If you offer attractive rates, even by +.5% or so (compared to alternatives), you can really get people interested. It's very hard to find yield these days, so I think that's opened many people up to alternative streams.
4) Buffer your estimates, pick clear milestones, always hit your targets and you will have the most loyal group of lenders imaginable.

Thanks

    @Trevor Ewen  

    Great insight. Awesome point on your second recommendation! ! We are usually very generous to investors - though we look primarily for longer term investments. Ill have to begin thinking how I can create shorter turn arounds to investors while leveraging debt.