Private money and what questions to ask

[Nathan Nance]

I would like to learn and network to explore private money lending. I am an investor in the northeast and looking to be real aggressive in the coming months.

What are some good questions to ask private lender?

What are some good rates etc?

[Patrick Menefee]

What kind of funding are you looking for? Are you looking for someone to play bank and finance your purchase long term, provide short term funding for a rehab or flip, etc.? Each of those will have different implications, expectations, and terms

I've worked with a few sources of private money and am constantly looking for it here in North Carolina, and the discussions generally revolve around the same things - they want to know how well capitalized you are, what your experience is, and what the deal looks like. 

You want to find out what kind of money they're lending (is this their life savings, or their kids college fund, or something else?), what type of collateral they're looking for, what kind of personal guarantee, what their terms are, if they have prepay penalties, charge points, charge for extensions on short term loans, etc.

Rates depend on the type of loan as mentioned previously as well as how well you know each other. Rates for hard money are around 9-13% (if you can access it), so bear that in mind. Conventional mortgages are around 4%, commercial loans are between 4-7%. Take all of that into consideration when looking at the rate they offer and what you suggest, and also take into account the simplicity factor. Fewer points may be worth a higher rate. You may also find it worth it to shave a little bit of the rate by providing additional documentation and extending due diligence for a longer close, or vice versa. All play into rate, but you should anchor back to the widely available rates as a starting point to adjust off of