Vetting A private Investor

8 Replies

In my search for Private Investors for my rehabs, I have came across so many fakes, I lost money back when I first started and I even met the guy face to face! Of course I learned never pay up front fees. Moving ahead to the present, I have had random calls and emails after I put some of my projects out there telling me they want to lend. What is the best way to Vet a private lender who says they are lending with their own money or with partners?? I want to be cordial and not seem suspicious but when I am paying 13% and somebody calls me and says they will lend at 6% only I am a bit boggled.. Obviously that is way more than what the bank would pay if its just sitting in an account.. but......

Go to your local REIA and find some of the sponsors who are HMLs. If you want to call them private lenders, then do that, but they are hard money lenders. When it is a COMPANY that borrows from a line of credit, their own cash or from a fund of some sort, then they are hard money lenders.

A private lender is someone who maybe has 200k or 2 or 3mil in the bank or in their own 401k or ira and wants to lend it to friends or family. Or maybe it is my aunt who had 40k in a CD at a bank and lent it to me to buy a little house and she got 6% instead of .25%.

As far as the vetting, ask other investors who are friends who they are using. You, as an investor, should know others who are doing what you are doing. If you dont, you should. Network and find out who the good rate and term hard money lenders are in your area. They should be companies who are easy to work with and help facilitate the transactions. It is not always about the best rate, but the ease at which you can get the property financed, rehabbed and sold.

Dont even think about someone who is soliciting you online. Pay the yearly dues to a REIA and meet some people, NETWORK locally.

there is no 6% private money... total waste of your time even responding to those.. I bet you have learned this.. run your deals at 10 to 13% with or without points.. buy them and make your dough.

chasing SO CALLED 6% money is a pipe dream and its just scammers preying on those that know no better or think they hit the lotto...

Investors at REIA's are going to all be thinking 10% plus that's the going rate.

Remember if its too good to be true, it usually is. Unless its some rich close friends or family members who are letting you use their money as a favor to get your business up and running, like @Jay Hinrichs said its 10-13% with or w/o points

@Chinmay J.   I am able to borrow from banks for my short term deals.  these are FULL doc 2 year tax return.. PFS  showing lots of liquidity and experience... Big net earnings for years.

all of that gets me 1 point and 6.5 in Oregon ( might be able to get 6 but I have 6 to 8 million out with them so I am not going to argue LOL)  and in Charleston I get 1 and 5.5%  one million line of credit there.

that's as good as it gets from someone as you said that is not blood kin.. or fell of the turnip truck and struck their head.

Hey @Jeremy Hazelwood want to shoot me a message? I've been looking to find someone to possibly partner with on an out of state rehab deal. I'm a financial backer but I don't do hard money, I'd be looking for a joint the very least maybe I could pick your brain to more clearly define what I should be looking for. Hope to hear from you!

Thanks Guys for the feedback..I like to dream and its good to get brought back to reality, however I known lending one has been offerring 8.99% interest on fix and flip loans so under 10% is out there for investors.. My deals are pretty fat on the profit side so I dont mind 12% which I have paid to lendinghome for a project last year...but I always strive to find better and better opportunities to increase margins..