Using Private Lenders

[Alexis Gonzalez]

I'm hoping to get some insight from others in the community who have experience with private lenders. Has anyone worked with Allen Capital LLC (based out of Dallas, TX)? I've recently started to look into possibly using a private lender, but not 100% sure on how to screen them. This one looks more professional (both in the terms information and website) than others I've received information from. However I'm hesitate with them all wanting to transfer fund into a personal account. The goal is to acquire my first buy and hold residential home in northeast Ohio. Any feedback or advice would be greatly appreciated.

-Alex

[Jeff S.]

@Alexis Gonzalez & @Natalie Lykes,

You guys are going to get hammered. Assuming they are even reasonable, any fees you pay should be done thru escrow, title, or a closing attorney, as customary in your area, when your loan closes. The only fees any legitimate lender might request up front are an appraisal fee and perhaps a $40 credit check. The appraisal fee would be paid directly to the appraiser and the credit check to the lender. Thus, your only risk should be in the $40 ballpark.

Some will come back here and say they require an application fee, also euphemistically/laughably called a “commitment fee.” These can be legitimate in large commercial loans. Lenders that require an application fee for any loan most on this board might need are all but going the way of the dinosaur. The industry is just too competitive now to take that seriously.

Ditto, loan proceeds. Legitimate lenders will only send funds to a neutral party after they’ve vetted you and your deal, received the signed loan docs they provided, received/reviewed your title prelim, evidence of hazard insurance, and a host of other requirements.

Nor should you be sending any personal credit info to anyone or accepting drivers licenses or other phony baloney info from the “lender” as some sort of proof that they are real. This is a sure sign of a scam. Legitimate lenders don’t act this way.

Before you start making unsolicited calls to lenders, understand that virtually none of the sites you’ll probably go to (Facebook, Connected Investors, LinkedIn, Craigslist, and even BP) vet their lenders. There are no barriers to entry for anyone to advertise themselves as a lender. The AAPL (FD - we’re members) and Scotsman Guide tend to attract a more professional membership, since you have to pay, but no guarantees either.

Just like you (hopefully) have a process to vet your properties, you need one to vet your lenders. There have been many posts written here on doing that. Eyeball-to-eyeball at real estate clubs, with a list of informed questions, is your safest start in my view. Stay off the web. You’ll have no idea with whom you are communicating.

Last, be careful of anyone coming to this public board and offering to help you privately. If they don’t believe their advice can withstand public scrutiny, you can effectively ignore it.