Private Lending

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Johnny Scott
  • Medford, NY
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New to flipping, Private lenders? Help please

Johnny Scott
  • Medford, NY
Posted Nov 17 2022, 02:58

Hey I'm new to investing with a background in home renovation. A friend of mine told me to post on here and ask are private lenders the way to go and if so does anyone know of some who would be interested in partnering to flip some properties?

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Nate Sanow
  • I​nvestor & Agent
  • Tulsa, OK
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Nate Sanow
  • I​nvestor & Agent
  • Tulsa, OK
Replied Nov 17 2022, 04:19

Does it have to be private lending? Hard money can often function like private, and I find many people when starting out need HML vs PML….its a way to get a notch on the belt, and then on future deals gain private money. Many HML fund acquisition and rehab, the trick is getting a lower loan to cost ratio.

I am not sure actual end final private lenders will engage here on BP right away or if ever - I would actually love it as I’d love to raise private money myself.  However I have found that what does work is building rapport and that comes with a few deals done…with your background in renovation, maybe you could also look into a local partnership, especially if you can afford to do most of the labor but wait to be paid on the backend, and find an investor who would value not having to pay crazy high remodel costs along the way.  I am looking into such deals from an investors perspective in my market, and see that value myself.  

I wish you well on your journey to success.  

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Bob Reinhard
  • Lender
  • Patterson, NY
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Bob Reinhard
  • Lender
  • Patterson, NY
Replied Nov 17 2022, 05:03

Greetings to you out on the Island.

Your background helps assist your money access but 1. Private money is from private people, 2. hard money is from a lender and likely more readily available.

Reach out any time to discuss more.

Much success.

Bob

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Kenneth Garrett
  • Investor
  • Florida Panhandle/Illinois
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Kenneth Garrett
  • Investor
  • Florida Panhandle/Illinois
Replied Nov 17 2022, 05:08

@Johnny Scott

I prefer private lending over hard money because I feel I can get a better rate and less fees. True private lenders are individuals who lend money out. Many hard money lenders are using the terms interchangeable. They are licensed to lend money out, private lenders are not.

I met my lenders at local REIA meetings and meetups. I have met a few here on BP, but I have not done any deals with them. The BP private lenders I have met have reached out to me via just responding to posts I have made, which were unrelated to me seeking out private lenders. You can't google private lenders, it just doesn't exist in that format, if you do, it will most likely be a hard money lender. Nothing wrong with that just be aware it's not the same.

It takes relationship building. Each of you needs to be comfortable with each other. My first deal I used 3 private lenders to fund my purchase, I paid for the rehab (BRRRR project). After that I was able to finance all my projects 100% purchase and rehab with one or more multiple lenders. It took time. Networking is a great way to build relationships with people.

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Alex Breshears
  • Lender
  • Hampton Roads, VA
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Alex Breshears
  • Lender
  • Hampton Roads, VA
Replied Nov 17 2022, 11:04

hi Johnny! Despite what another poster said - there are private lenders here, I am one! Also as one of the authors to BiggerPockets private lending book - I can tell you that every time we speak to a group of active investors about 20% to 30% of active investors have lent out capital for deals to other investors. We are here, we just aren't spouting our rates and terms. Also as another poster mentioned, hard money loan companies like to use private money and hard money interchangeably - when from the borrower's perspective they are quite a different experience. For example, most private lenders (in my definition) will not check credit, we aren't doing full appraisals, we don't usually have rates and terms sheets, etc. It is a less formalized process most of the time, but there are still safeguards and documents you will need to submit to us, so it's not free no strings attached money at all.

Just to give you some perspective on terminology - partnering on a deal means that someone will come in as a capital partner, which means they are on the equity side of the equation with you as an owner. The private lender will be exclusively on debt side, they do not have their name on the title report, they are the debt provider - so if something happens and the loan isn't paid they have the right to foreclose on that property and regain title or it is sold at an auction and they are repaid. When looking for someone - just be very clear on what exactly you are looking for - so you can have the appropriate conversations with the right people. there are definitely ramifications for each option and preference to what people want to do with each deal. 

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Johnny Scott
  • Medford, NY
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Johnny Scott
  • Medford, NY
Replied Nov 20 2022, 20:43

@Alex Breshears thank you. I am green when it comes to all of this side of things but I do definitely see deals and potential. I know of ones on the market as well as some that aren't and I'm trying to connect with honest investors.

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Robin Simon
  • Lender
  • Austin, TX
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Robin Simon
  • Lender
  • Austin, TX
Replied Nov 21 2022, 05:36
Quote from @Johnny Scott:

@Alex Breshears thank you. I am green when it comes to all of this side of things but I do definitely see deals and potential. I know of ones on the market as well as some that aren't and I'm trying to connect with honest investors.


 I would say that when you are new, its best to go with an established lender that has a solid reputation, good reviews, presence online and here on BP - its definitely risky going the informal route when you are just starting out

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Eliott Elias#2 All Forums Contributor
  • Investor
  • Austin, TX
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Eliott Elias#2 All Forums Contributor
  • Investor
  • Austin, TX
Replied Dec 2 2022, 23:10

Read the book "Raising Private Capital" 

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Chris Seveney
  • Investor
  • Northern Virginia
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Chris Seveney
  • Investor
  • Northern Virginia
Replied Dec 3 2022, 04:59

@Johnny Scott

Your better ever would be to network with people in your local area through investment groups to know who the players are.

BP is great but also watered down in that your audience is too big for your need

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Dave McIntyre
  • Investor
  • Northern NJ
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Dave McIntyre
  • Investor
  • Northern NJ
Replied Dec 4 2022, 10:13

Hi Johnny,

In case it can help w/ your plans, you might also consider unsecured funding. Funds can be used for down payment or gap funding, as well as 100% funding of a purchase.

Be happy to connect.

Best,

Dave



Be happy to jump on a call.



Hi Rich,

In case it can help w/ your plans, you might also consider unsecured funding. Funds can be used for down payment or gap funding, as well as 100% funding of a purchase.

Be happy to connect.

Best,

Dave