Hi BP

So can you please help me understand private money for long term buy and hold rentals? I know this is pretty general question but are there a few traditional ways this commonly work?

Does the lender usually lend the full purchase amount? Just the down payment? Do they ever just buy the property then create a seller finance situation?

Moving forward, I can see this being a tool in the toolbox that helps, but want to have a better understanding of it to help create win wins for all that is involved. 

Thanks in advance.

@Joe M.

Private money works generally the same way as a bank loan. They can be more creative about credit, loan amount, and terms, but can also have higher or lower rates depending on if it's seller finance or true private money. Most will probably be in the 70-80% range so they are covered in a default situation. The upside is that most private money will not reflect on your credit score.

Originally posted by @Blake Garcia :

@Joe M.

Private money works generally the same way as a bank loan. They can be more creative about credit, loan amount, and terms, but can also have higher or lower rates depending on if it's seller finance or true private money. Most will probably be in the 70-80% range so they are covered in a default situation. The upside is that most private money will not reflect on your credit score.

Appreciate the response.  Would you say its common to do a long amount like 30 years?  I guess I am thinking around borrowing 100-150k amount

The cool thing about private money is that it’s 100% up to you and the individual giving you money. Don’t think about “what’s common”, start thinking about what your private lender needs. Do they have a kid going to college in a year and they want tuition for the first couple years? Do they just want some extra mailbox money each month so they can go live in Hawaii? Are they looking to be an actual partner in your deal? Many approaches but it all comes down to the individual’s needs!

Originally posted by @Matt Hurley :

The cool thing about private money is that it’s 100% up to you and the individual giving you money. Don’t think about “what’s common”, start thinking about what your private lender needs. Do they have a kid going to college in a year and they want tuition for the first couple years? Do they just want some extra mailbox money each month so they can go live in Hawaii? Are they looking to be an actual partner in your deal? Many approaches but it all comes down to the individual’s needs!

Thanks Matt.  This is kind of what I was getting at.  Thanks for clearing it up for me.  

@Joe M.

At that amount I'd suggest a 20 year. It gives good debt pay down and still solid cash flow.

My personal example I purchased a house for 25k in 2012 and financed 80% with a $200 payment. My note is now up for renewal. I have it paid down to 7k. I'm going to borrow extra 13k back out and use it for a next investment. I'll borrow back to 80% of current value which is up and still have the exact same cash flow from the rental.

Originally posted by @Blake Garcia :

@Joe M.

At that amount I'd suggest a 20 year. It gives good debt pay down and still solid cash flow.

My personal example I purchased a house for 25k in 2012 and financed 80% with a $200 payment. My note is now up for renewal. I have it paid down to 7k. I'm going to borrow extra 13k back out and use it for a next investment. I'll borrow back to 80% of current value which is up and still have the exact same cash flow from the rental.

Thanks Blake. Really appreciate it

@Blake Garcia how did you find a private money lender I trying to a purchase a property for $25k

Originally posted by @Aaron Dumas :

@Blake Garcia how did you find a private money lender I trying to a purchase a property for $25k

Think about your inner network of people first if anyone would fit that for you