Why are there so many RE Lenders?
Real Estate Investor · Memphis, TN · Member since 2016 · 440 posts · 145 votes
Why are there so many RE Lenders?
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesto 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
17 Replies
- 2dRyan BrownPro MemberReal Estate Agent · Louisville, KY · Member since 2022 · 93 posts · 31 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 · 145 votes2d
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.
- 2dJay 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 · 23 posts · 6 votes2d
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 · 10 posts · 3 votes2d
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.
- 2dRyan BakerBusiness MemberLender · Strongsville / Cleveland, OH · Member since 2026 · 109 posts · 27 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 · 145 votes1d
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 · 145 votes1d
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.
- Lender · Atlanta, GA · Member since 2021 · 5 posts · 2 votes1d
Word of mouth is a great starting point. For me, once the terms are reasonably competitive, I’d put a lot of weight on responsiveness and how the lender treats you when something doesn’t go exactly as planned.
There will always be someone advertising a lower rate, higher leverage, or fewer points. But if you find someone who answers the phone, closes when they say they will, handles draws quickly, has decent products, and treats you fairly, there’s a lot of value in building that relationship.
The cheapest lender on paper isn’t always the cheapest lender when you’re in the middle of a deal.
- Member since 2026 · 21 posts · 5 votes1d
Jamie, I'm a mortgage broker, so take this with that in mind. The way to cut through the noise is to give every lender the same one-page deal (purchase, rehab budget, ARV, your realistic timeline plus a 3-month cushion) and ask for a written term sheet. Then compare total dollars out of pocket at month 6, 9 and 12, not headline leverage. That's where your current step-up after month 6 really shows. Questions that separate them: Is it a true 12-month term or 6 months with an auto-renewal? Are extensions a fixed fee or a rate change? Is interest on the full loan or only on rehab money once drawn? How fast are draws and what do inspections cost? Who actually funds it? Is the loan size based on purchase or ARV, and what reserves do they want? For a few flips a year, a lender who funds draws fast and doesn't punish one slow project is usually worth more than the cheapest quote.
Quote from @Jamie Parker:
By no means am I complaining; It seems as the more I get after deals, the more unique lenders I encounter. How do I know which lender to use or what scenario works best for one lender over another.
There are some advantages I’ve noticed so far single family fix and flips. One lender offer 100% purchase and 100% rehab loans. Another lender offers deferred interest payments. I can from that standpoint however there seems to be dozens of lenders. How does one evaluate the lender for the most benefit. For now I have simply used word of mouth referrals. Would like to know your thoughts.
@Jamie Parker these are all great points, and I think the key is understanding that not all lenders are structured to serve the same type of investor or investment strategy.
From a lender's perspective, the best financing option isn't necessarily the one offering the highest leverage or the lowest interest rate. It's the one that best fits the deal, protects your margins, and allows you to execute your business plan successfully.
When evaluating lenders, I'd pay close attention to:
Leverage: How much of the purchase price and renovation budget will the lender finance?
Total Cost: Interest rate, origination points, processing fees, closing costs, and extension fees.
Rehab Draw Process: How quickly are draws inspected, approved, and funded? Are funds advanced or reimbursed?
Closing Speed: Can the lender consistently meet the closing deadlines?
Flexibility: How does the lender handle unexpected construction delays, budget changes, or market conditions?
Communication & Servicing: Is there a responsive team available throughout the entire loan, not just during origination?
One thing I'd emphasize is the importance of building relationships with lenders who understand your investment strategy and can grow with your business.
We work with investors across multiple strategies, including Fix & Flip, Bridge, DSCR, Multifamily, Commercial, Mixed-Use, and Ground-Up Construction financing.
Our philosophy is that financing should be structured around the deal and the investor's exit strategy—not simply the loan product.
My advice: Find two or three lending partners you trust, understand their strengths, and know which type of deal each one handles best. Having a lender who knows your business, communicates consistently, and can execute when it matters is worth a lot more than chasing the lowest rate on every transaction.
At the end of the day, a lender should be more than a source of capital. They should be a reliable partner in helping you grow your real estate investment business. Best of Luck!
- 1dRyan SpathBusiness MemberReal Estate Agent · Boise, ID · Member since 2017 · 598 posts · 382 votes
For me, a lot of it comes down to the Know, Like, and Trust factor. I want to know that when I use or refer a lender, they're going to be fair, honest, and have my client's best interests in mind.
Every lender has different products and strengths, so it's good to have a few relationships depending on the deal. Rates and terms obviously matter, but so does having someone who answers the phone, works through problems, and is available when the bank closes. That relationship can be worth a lot when things don't go as planned.
- 1dSimon W.Business MemberReal Estate Consultant · Lehigh Valley PA & New York City · Member since 2013 · 1k+ posts · 691 votes
I'll add how the costs get treated, since it can change which deal is better. On a flip, points and interest usually just become part of the cost of the project and come out of the profit when you sell.
On a rental loan it's different. $5,200 in points on a long term loan is usually spread over the term, so about $173 a year on a 30 year note, not all at once.
When you compare lenders, I'd add the fees up per deal and note which ones you'll deduct right away vs. over time. Keep the closing statement for each loan, it makes the books way easier.
- Lender · Boynton Beach, FL · Member since 2026 · 161 posts · 68 votes1d
Hey Jamie — 8 doors in Memphis, you’re seeing it right. There are dozens because every lender solves a different part.
My filter as a DSCR lender:
Fix & Flip / Bridge: 100% purchase + 100% rehab + deferred = great for fast exit <12mo. Rate 11-13% + 2pts. Use when ARV spread big.
DSCR Rental: Rent covers mortgage, no W2. 20-25% down, 7-8.5%, 30yr. Use for holds.
Bank/Credit Union: Cheapest 6.5-7% but slow, needs W2/DTI. Use for slow BRRRR.
Evaluate on true cost — points + prepay + extension on a $150k Memphis deal, not just rate. That 100%+100% can cost more than 80% if you hold 9 months.
For volume, pick 2-3: 1 flip, 1 DSCR, 1 bank — and stick. Word of mouth is actually best filter — who funded on time.
Share a deal (purchase/rehab/ARV/rent) and I'll tell you which bucket I'd put it in.
- Lender · Franklin, TN · Member since 2026 · 123 posts · 35 votes1h
One question that sorts them fast is asking who actually funds the loan and who orders the draw inspections. Brokers aren't bad, but you want to know if you're talking to the money or to someone placing it, because that changes how fast a problem gets fixed mid-rehab.
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