Why are people so secretive about their private lenders?

Why are people so secretive about their private lenders?

Bristol, PA · Member since 2015 · 10 posts · 3 votes

There's an old saying that goes something like "A candle loses nothing by lighting another candle".  Why is that so hard for people to grasp?  Being a real estate newbie I've talked to plenty of people that I personally know in the business and no one seems to want to give me a lead on a private lender.  They talk about how they use OPM, however, they suggest I look into mortgages or hard money.  It feels like they'd rather me get the short end of a deal by paying extra points, fees and interest to acquire a property instead of maybe introducing or referring me to a lender that has helped them achieve their real estate goals time and time again.  At the end of the day I'm going to keep looking until I find great private lender and maybe I may have to use hard money at first, but I just want to know why people are so tight on their lenders.  Are they afraid that their lender will run out of resources? Do they not want to continue to put money in their lenders pockets to increase their lending power? Inquiring minds wanna know...

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Investor · Tavares, FL · Member since 2015 · 110 posts · 24 votes
10y

It's very possible their private money lender doesn't have enough funds to take on multiple investors. Or maybe they feel like sharing their private money investor to a new investor could lead to disastrous results and some how end their relationship with the private money. They stand very little to gain and everything to lose in this situation, especially with a new investor. 

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  • Investor · Tavares, FL · Member since 2015 · 110 posts · 24 votes
    10y

    It's very possible their private money lender doesn't have enough funds to take on multiple investors. Or maybe they feel like sharing their private money investor to a new investor could lead to disastrous results and some how end their relationship with the private money. They stand very little to gain and everything to lose in this situation, especially with a new investor. 

  • Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    10y

    I won't give out the name of my private lenders unless they authorize me to do so. Some say yes, others have said no. Some are family members that would never lend to a stranger. Others are old time friends with a small amount of money they want to put to work and I have an established relationship with. My name gets tossed around frequently as a HML but I encourage that (I do HML out of my SOLO 401K and cannot lend to myself). I don't think they want you to pay more points or higher rates, but rather many people don't want their private information shared. There are LOTS of people wanting to lend money. Advertise on CL, ask friends, family, neighbors, attend REIA meetings, etc.

  • Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 904 votes
    10y
    Arteshia Darby in this case the analogy is more akin to burning both ends of the same candle, as private lenders do not have access to infinite capital like large banks. Having said that, since you are somewhat local, send me a note if you find a good deal.
  • Chris MasonPro Member
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    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y

    Same reason folks rarely get answers to "who is a great investor friendly realtor in xyz market?" on this forum.

    They don't want their go-to awesome person being dry on funds because they lent it to you, and they don't want that awesome go-to realtor giving those pre-mls property leads to you. 

    In theory this shouldn't be a problem with institutional lenders, as our supply of money is in practice unlimited. We can (& have) just start selling retained loans on the secondary market if we need to drum up a few million to lend out quick-like and in a hurry.

  • Lender · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
    10y

    And then there are other levels of private lenders that have endless capital, lower rates and lower fees and easier access to their capital than the smaller private lenders you are seeking.  Where you focus is what you find.

  • Bristol, PA · Member since 2015 · 10 posts · 3 votes
    10y

    Thank you all for your insight. You all make very valid points. @Percy N.as soon as these this deal is out of attorney review I will reach out to you. @Charlie Fitzgerald I like how you put things into perspective. Think small get small, think big get big! @John Thedfordmaybe you can invite me over to dinner to meet some of this family that wouldn't lend to strangers. I make a helluva sweet potato pie LOL. But I do understand what you're saying and you're right about family and close friends. I don't expect for someone to just hand over a name, however, a warm introduction (after prior approval of course) would be a great start. @Jeremiah H.that's what I'm starting to think the issue is and I understand the risk, but that's why the numbers have to be right. And even if I used a referral I'd still want to be mentored  throughout the entire process to ensure that things don't turn into a big disaster.

  • Investor · San Marcos, TX · Member since 2015 · 272 posts · 360 votes
    10y
    Private lenders are typically: Family Friends Friends of family Friends of friends Your business associates Business associates of family Business associates of friends This is not all but most situations. They are reluctant for two reasons you are not family, you are not friends. People like the private lender title. It sounds better than saying my parents loan me the money for real estate investing.
  • Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    10y

    @Arteshia Darby most of the private money I borrow is at very low LTV. In some cases, about 30% LTV. That scenario won't work in most instances. In my private lending, I usually try not to go over 70% but I usually won't lend to people without a track record and on properties I can visually inspect.

  • Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    10y

    @Arteshia Darby,

    You've got a lot of good replies here.

    Yes, there is a lot of potential downside to having a current private lender get involved with a new investor, especially without some education on investing and using private money. I, personally, will save working with uneducated (in REI) lenders for last on my list because I'll have to spend more time with them to bring them up to speed. That's not really a bad thing, because the SEC reg.'s require you to establish a personal relationship before entering into any financial dealings.

    Plus, there's an old saying: "That which is taught is twice-learned." If you want to test your understanding of a topic, try talking about it to see if you can make sense of it to someone new.

    Then again, the whole SEC thing spooks a LOT of people. Fear of a regulatory agency probably kills more deals and business relationships than lawyers and RE agents do.

    David J Dachtera

    "Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
    - DJ Benedict

  • Bristol, PA · Member since 2015 · 10 posts · 3 votes
    10y

    Thanks for your feedback @Leland Barrowand @David Dachtera

  • Rock Hill, SC · Member since 2015 · 1k+ posts · 597 votes
    10y
    Originally posted by @Arteshia Darby:

    There's an old saying that goes something like "A candle loses nothing by lighting another candle".  Why is that so hard for people to grasp?  Being a real estate newbie I've talked to plenty of people that I personally know in the business and no one seems to want to give me a lead on a private lender.  They talk about how they use OPM, however, they suggest I look into mortgages or hard money.  It feels like they'd rather me get the short end of a deal by paying extra points, fees and interest to acquire a property instead of maybe introducing or referring me to a lender that has helped them achieve their real estate goals time and time again.  At the end of the day I'm going to keep looking until I find great private lender and maybe I may have to use hard money at first, but I just want to know why people are so tight on their lenders.  Are they afraid that their lender will run out of resources? Do they not want to continue to put money in their lenders pockets to increase their lending power? Inquiring minds wanna know...

    There are many reason but for some of us this is not a part time gig. I have built up myself over 17 years and now have a company. With that we have many lenders ,we have worked hard to build and aquire a business relationship. This is how we support our families and others.  How many big companies , want to give away their trade secrects. With that being said many ways to aquire private lenders. The projects are really what matters, along with experience in this business.

    Just my two cents

    PM me if I can help any answer questions

    Alex

    bare with spelling grammar 517 am now..

  • Bristol, PA · Member since 2015 · 10 posts · 3 votes
    10y

    I understand your feelings @Alex Franks

  • Rock Hill, SC · Member since 2015 · 1k+ posts · 597 votes
    10y

    Okay now saying that their are some good people to talk this site.

    If I had advice an easier to find some local private lenders. Head to the local auctions. promise every body who is  buying is buying cash. That simple tip of the day.

    Alex

  • Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    10y

    My gut reaction is PML/HML loans frequently are hidden for a logical (almost said good) reason; Banks what the buyer to have 'skin in the game', aka no 100% financing. As soon as PML/HML becomes visible, the whole loan process goes into the toilet. Banks lend with the LTV concept and the buyer is expected to contribute 'personal funds', not HML money.

  • Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    10y

    @Alex Franks,

    Just because they're paying "cash" does not mean it's THEIR cash, and they will likely be equally reluctant to share their financing sources.

    @Jeff B.,

    I hold that those who think "skin in the game" means "money" don't understand the phrase.

    David J Dachtera

    "Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
    - DJ Benedict

  • Rock Hill, SC · Member since 2015 · 1k+ posts · 597 votes
    10y
    Originally posted by @David Dachtera:

    @Alex Franks,

    Just because they're paying "cash" does not mean it's THEIR cash, and they will likely be equally reluctant to share their financing sources.

    @Jeff B.,

    I hold that those who think "skin in the game" means "money" don't understand the phrase.

    David J Dachtera

    "Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
    - DJ Benedict

    David you are correct but just because they paying cash also does not mean it is not theirs either. I was not looking for a debate. Was merely looking to help lead some one in a different path or to think out side the  box. TO be quite honest I was attending the local auction last few years. Yes I was a major player their along with about 15 folks that meet their on a normal basis. Oh and surprise it was all their funds. Hmmmm

    Wow so negative but all good I rolled over the right side of the bed.

    LOL Alex

  • Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    10y

    @David Dachtera 

    "I hold that those who think "skin in the game" means "money" don't understand the phrase."

    As in Merchant of Venice??? :giggle:

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