Personal Loans for purchase and rehab?

4 Replies

Recently, in working to start up my investing business, I stumbled onto the idea of using large personal loans for funding purchases and rehabs of rental properties. Once tenants are in place, I would refinance to a privately-held 30-year fixed loan.

Has anyone used large personal loans say in the range of $400,000, to acquire and rehab real estate? What has been your experience?

The deal would have to include extracting the funds put into the deal originally, plus carrying costs of the personal loan, in my mind.

@Russ Beck  What's the purpose of using a personal loan versus just going to the bank and getting purchase + rehab financing via a mortgage? Most smaller banks or credit unions offer products like these.  A personal loan would almost certainly have a high interest rate, plus you have to refinance out of it, which would add a another set of closing costs.

The highest personal loan amount I've seen is $100k, which still isn't a lot to work with in high price areas.

- Tom

@Tom S. Thanks for your reply. I would tend to agree with you, until I found a website called connected investors exchange, which helps the investor find loans for deals. They have all types, hard money, cash out refi, 30 year fixed and personal loans up into the millions. I'm still learning about it, but I think some of these might lend to an LLC as well. I would need to refi anyway since I'm buying properties that need work.

Smarter rental management
Outperform your peers by 71%
NestEgg landlords save $6,960/yr in fees & 20 hrs/mo*. Self-manage for free or go hands-off for $29.
Start now, get $500

@Russ Beck Just be careful out there - lots of reports here on BP about scams. Beware of anyone stating "personal loans in the millions". I've personally had the best luck with people you can meet in person. At a REI group Meetup or a bank / mortgage officer.

Good luck!

- Tom

@Russ Beck agree with @Tom S. here, please be very careful with personal loans of this nature. If you have a property, then there are TONS of lenders who will offer financing.  And it's the type of financing that is regulated.....personal loans don't have to follow the same rules as real estate loans.  Real estate loans will be structured better and safer for you as a consumer.  Feel free to ask anything additional.  We are here to help if you need.