Erie, PA · Member since 2018 · 413 posts · 348 votes
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.
Ypsilanti, MI · Member since 2018 · 189 posts · 127 votes
7y
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!
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.
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
Ypsilanti, MI · Member since 2018 · 189 posts · 127 votes
7y
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!
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.
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.
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.