Are private lenders less strict than the banks?

[Rada Vassileva]

Hi guys, this is a general question: Are private lenders less strict than the banks in regards to their loan requirements?

[Kenneth Garrett]

@Rada Vassileva

Let’s distinguish the difference between Hard Money Lenders and Private Lenders.  The terms are interchanged, but there is a difference.  

Private Lenders are individuals who lend money to projects. These are generally people you know family, friends, people you have met at REIA meetings, meetups and real estate events. There rates are anywhere between 8% - 10% sometimes a point or two.

Hard Money Lenders are loaning you Money with less strict requirements then traditional lenders but the rates will be 12% or higher and 3-5 points.  Hard Money Lenders also promote themselves as Private Lenders as well, but there is a distinction.  

To answer your question yes, in general Private Lenders have less strict requirements. They are more concerned on the quality of the project.  They are also investing in you.  Having a good track record is as important as the deal.  If you don’t have a track record you can partner with someone on your first deal to build up your credibility.