How to find a private lender?

Question

I’ve never used a private lender or partnered with anyone. We have used cash and a commercial loan so far. This time we would like to see about a private lender if that were possible but I have no idea how to even start.

We are in South Louisiana ,

Looking at a 12 unit apartment building

5 acres of land (room to expand or improve amenities)

All 3bd 1.5bath.  100% occupancies

Rent 1,000.00

Owners pays sewage, lawn care, water

Asking 799,000 it’s been listed for 400 days.

Who has experience with own finance and could give me some advice on that has well.   thanks everyone!

Matt Hurley · Answer

In my experience, the short answer is network your butt off and make it clear you’re looking for a partner. I found my private lenders at local REIA meetings. First one was a gentleman who could borrow $$$ from his 401k, we’re doing a BRRRR deal together that I’m managing, but haven’t had to put any of my personal money in.

Jay Hinrichs · Answer

seems like a pretty cool deal.. just get the owner to finance it you don't need a private lender unless your looking to do this with no money out of your pocket.

and if that's the case then you really want a JV partner .. lenders do short term lending not long term buy and hold

JV partners do long term buy and hold.

Jay Hinrichs · Answer

you should go through the listing agent they will be all about helping you put this together.

undercapitalized investors get done in daily..

so if U are.. either ask for less downpayment and tell seller your putting 25k into a reserve account that if you don't use it for unforeseen repairs in say 24 months reverts to him / her as a credit towards the owner carry note..

owner financing is dead simple.. I mean really simple.  LOL

Jay Hinrichs · Answer

going around the agent direct to the seller will create an enemy.. I would no way do that.

Beth Matherne · Answer

@Jay Hinrichs we have the money for the down payment but at asking price that would deplete a very large portion of our savings so our concern would be in the event of a repair would be able to cover it if it happened immediately.

We had talked about owner finance but we have never done that either do you have advice? The listing is with a relator, would we still contact her or be better off getting the owners name on our own to contact privately?

Beth Matherne · Answer

*Sorry it should say owner finance at the bottom*

John Corey · Answer

For seller financing, private financing, etc., you want to understand the laws in your state and how the contracts would work. LA is a bit different in terms of the legal system (Napoleonic Law vs English Common Law). Much will be the same as in other states. Just check into the difference.

If you have a local REIA, ask the regulars who they go to for legal work and similar. The seasoned investors will also be able to provide advice on how to structure the deals. What tends to work so what sellers and private lenders are used to seeing.

In some sense, the concepts you asked about are not that different from what you would do with a traditional lender. What is different is you have a lot more room to negotiate. That flexibility requires a good understanding of what you need, what the other party needs and how to lock it down in a contract.

Getting good at seller or private finance requires time and practice. You will not become an expert off 1 deal. You are more likely to mess it up the first time around. A really savvy lawyer can be a godsend.

For any privately funded deal to work, you need to think real hard about how they will get their money back. While banks are happy to be in for 30 years, private money tends to think 5 years would be a very long time. We all want to get our money back out and let an institution stay in long term. Your plan for how you will replace the seller financing or private lending is a big factor in your ability to raise funds this way.

Javier D. · Answer

@Beth Matherne

I would seek professional guidance from a real estate broker . Maybe listing agent himself  and have your title person be an attorney familiar with commercial closings so they can protect your interests.

May be able to work out repairs/credit to help with cash out of pocket etc.

Going with private lending will cost you 2 closings instead of 1 within 18 months. This can bring unforeseen issues when refinancing. If repairs are your concern then address during due dilligence period and nevotiate with seller.

Sounds like a good deal. Good luck.

Beth Matherne · Answer

@Jay Hinrichs

Thank you!

How to find a private lender?

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