Why are there so many RE Lenders?
Real Estate Investor · Memphis, TN · Member since 2016 · 440 posts · 144 votes
Why are there so many RE Lenders?
Most Popular Reply
Ryan BrownPro Member
Real Estate Agent · Louisville, KY · Member since 2022 · 79 posts · 25 votesJamie, I’d compare lenders using the same actual deal rather than their headline offers. Ask each one how much cash you’ll need upfront, the total cost if you finish on schedule, and what happens if the project takes three months longer than expected.
I’d also ask how rehab draws work. Are they advancing the money or reimbursing you after you’ve paid for the work? And does deferred interest mean it’s simply accumulating until payoff? Those details matter more to me than the advertisement.
I’d include some small local banks in those conversations, too. Here in Louisville, we have lenders that hold loans in-house and have flexibility on investment properties. They may not offer the highest leverage, but I’d want to compare their total cost against the private or hard money options.
Word-of-mouth referrals are a good starting point. I’d specifically ask those borrowers how the lender handled draws, delays, and extensions—not just whether they got the loan closed. That’s the relationship you’ll actually be dealing with once the project is underway.
10 Replies
- 13hRyan BrownPro MemberReal Estate Agent · Louisville, KY · Member since 2022 · 79 posts · 25 votes
Jamie, I’d compare lenders using the same actual deal rather than their headline offers. Ask each one how much cash you’ll need upfront, the total cost if you finish on schedule, and what happens if the project takes three months longer than expected.
I’d also ask how rehab draws work. Are they advancing the money or reimbursing you after you’ve paid for the work? And does deferred interest mean it’s simply accumulating until payoff? Those details matter more to me than the advertisement.
I’d include some small local banks in those conversations, too. Here in Louisville, we have lenders that hold loans in-house and have flexibility on investment properties. They may not offer the highest leverage, but I’d want to compare their total cost against the private or hard money options.
Word-of-mouth referrals are a good starting point. I’d specifically ask those borrowers how the lender handled draws, delays, and extensions—not just whether they got the loan closed. That’s the relationship you’ll actually be dealing with once the project is underway.
- Real Estate Investor · Memphis, TN · Member since 2016 · 440 posts · 144 votes13h
Quote from @Ryan Brown:
Jamie, I’d compare lenders using the same actual deal rather than their headline offers. Ask each one how much cash you’ll need upfront, the total cost if you finish on schedule, and what happens if the project takes three months longer than expected.
I’d also ask how rehab draws work. Are they advancing the money or reimbursing you after you’ve paid for the work? And does deferred interest mean it’s simply accumulating until payoff? Those details matter more to me than the advertisement.
I’d include some small local banks in those conversations, too. Here in Louisville, we have lenders that hold loans in-house and have flexibility on investment properties. They may not offer the highest leverage, but I’d want to compare their total cost against the private or hard money options.
Word-of-mouth referrals are a good starting point. I’d specifically ask those borrowers how the lender handled draws, delays, and extensions—not just whether they got the loan closed. That’s the relationship you’ll actually be dealing with once the project is underway.
Thanks for spelling it out in that regard. I have nothing against all the lenders reaching out, but at some point I had to ask myself; whats the difference. I will add to the comparison:
Draw Request Process
Reimbursement or Advance
Speaking to Small Banks
The deferred interest is, basically deferring payments for 6 months. Those payments are written into the loan, but there are no payments for six months. I have heard these types of loan in the Nashville Market.
- 13hJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
to me its about relationships.. if your just doing a few loans a year you can certainly dial for dollars and get the best deal possible if your doing volume then i think relationship and confidence of on time closings etc is the most important aspect
- Virtual Assistant · Member since 2026 · 17 posts · 5 votes12h
I think the biggest difference is that the best lender for one deal may not be the best for another.
For fix-and-flips, I'd look beyond how much they offer toward the purchase and rehab. Draw turnaround, whether funds are advanced or reimbursed, extension fees, and how quickly they can close all matter.
For rental properties, I'd look at DSCR requirements, cash needed to close, prepayment terms, and whether the loan structure fits the long-term plan.
I'd also pay attention to how responsive the lender is when something changes during the deal a good relationship and clear communication can make a big difference
Ultimately, I'd compare lenders using the same deal scenario rather than choosing based on the headline offer alone.
- Lender · Miami, FL · Member since 2026 · 6 posts · 3 votes11h
One thing that helps is running the exact same deal through each lender and comparing total cost, not the headline. Say it is a $200K purchase with a $60K rehab. A 100 percent purchase and rehab offer sounds great, but at 12 percent plus 2 points on the full $260K you are paying about $5,200 in points and around $2,600 a month in interest once it is all drawn, versus a lender at 85 percent of purchase and 100 percent of rehab where you bring roughly $30K but pay less in interest. On deferred interest, ask if it just accrues and comes due at payoff, because your real payoff number is bigger and it eats the profit fast if the flip runs long. I would also ask what cash to close really is after points, title and the first draw holdback, and how many days a draw takes to fund, since a slow draw can cost you more than half a point does. Honestly I would keep two or three lenders you have actually closed with and only shop around on the odd deal.
- 9hRyan BakerBusiness MemberLender · Strongsville / Cleveland, OH · Member since 2026 · 94 posts · 22 votes
Jamie, I'd compare lenders on total cost and fit for the deal, not just the headline feature. For a flip, line up points, interest, draw speed and inspection fees, then add deferred interest or 100% rehab funding to see what you really pay at your expected hold time. Ask who funds with their own money versus brokers, how fast they close, and whether draws take days or weeks, because delays cost more than a quarter point. Keep two or three lenders warm so you can match each deal to the right one. Happy to walk through the numbers on a quick call, my direct line and email are on my profile.
(Drafted with AI assistance.)
I agree with Jay that it’s about the relationship, and I would take it a step further, @Jamie Parker. At a high level, lenders can be divided into brokers and direct lenders.
Brokers are middleman who connect borrowers with lenders and help them find and arrange a loans. They shop among their network of lenders to compare interest rates, fees, and loan terms on your behalf and on behalf of the lender. Unlike a bank or a direct lender, a broker does not fund or issue the loan themselves. Once the loan is funded, they are generally out of the picture.
Other than in states that require a license, and these are few, there are few barriers to entry to becoming a broker. That explains why there are so many of them.
A direct lender is one who funds the loan, sets the underwriting rules, and manages the relationship with you. It’s here that the relationship becomes important because if you have any issues, and you inevitably will, a direct lender can offer an accommodation that a broker cannot.
Most brokers also call themselves lenders. This is not deceptive. It’s just important to understand who you are working with and what role they play in your deal. If you are just starting out or doing a few flips a year, my suggestion is to find local direct lenders you can get to know and who understand your market.
Real estate clubs, not websites, are designed to help you build face-to-face relationships with these individuals. The club organizer likely knows a few of these direct lenders. Get to know them face-to-face over lunch, bring a list of informed questions, and establish a solid relationship. This is a simple, practical, and safe approach.
- Real Estate Investor · Memphis, TN · Member since 2016 · 440 posts · 144 votes8h
I think that is part of what I have been experiencing. I am not knocking against brokers, but maybe there are some brokers mixed in with some of the interest i am receiving. I am a member of Memphis Investor Group here in Memphis. I understand how Debt and Equity partnerships can change how a deal works. I got connected with local Direct Lender. However if the deal is projected to be full cycle in 6 months or less, They have a good product. However, If the deal goals to 6-12 months, they have a escalated interest rate. Their rate goes to 18%.
I would like a 100% lender if they maintain a 12% rate for the entire life of the loan, up to 12 months. However with my current lender, it only took 20k cash to close on 220k loan with 22k in reserves and no credit check. At month 7, the rate goes from 12% to 18%.
That’s the accommodation I’m talking about, @Jamie Parker. Our loan docs specify a default interest rate of 16%. In 17 years as a direct private lender on local flips, we’ve never charged a dime above our base rate. Would it surprise you that we still do business with some we met almost on day one?
The good news about private lending is that, within the bounds of the law and the marketplace, all lenders are free to create their own terms.
Charging default interest is your lender’s way of saying they don’t want to do business with you.
“They have a good product.”
Really? No, they don’t. What they have is a short sighted attitude toward their borrowers. Keep looking, Jamie.
- Real Estate Investor · Memphis, TN · Member since 2016 · 440 posts · 144 votes6h
Thats their advertised terms. Basically a 6 month loan with a auto renewal for 6 more months at 18.75%. Not the best terms Ive ever heard. However for a couple newbies looking to take down a fix and flip, 100% purchase and 100% rehab terms 5% origination. Not the best terms period but a direct lender, Draw Request completed within 24hrs, No Draw Request with Documentation/Photos, no credit checks and local.
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