Private Money Lenders

[Carlos Ortiz Perez]

It is recommended to use Private Money Lenders? When is best and when is not?

[Robin Simon]

Quote from @Carlos Ortiz Perez:

It is recommended to use Private Money Lenders? When is best and when is not?

 If you are comparing against Conventional Loans - the answer is going to depend on some factors.  Generally, if you can qualify for Conventional Financing - then it is the better bet since rates will be lower (by about 1%) and likely a little lower on fees too.  However, here are some of the situations where going with a Private Lender may be better (even in some cases if you also qualify for conventional)

No DTI Ratio – DSCR Loans do not use DTI Ratio in qualifying and underwriting your loan

No Tax Returns – DSCR Loans do not require any tax returns (personal or business) when underwriting your loan

LLCs/Partnerships OK – DSCR Loans allow for you to borrow under an LLC or other entity structure instead of in your personal name – thus allowing LLC protection, the ability to invest with partners and protection of personal credit (loans do not show up on personal credit reports when borrowing through an LLC)

No Concentration Limits – Conventional Lenders following Agency Guidelines have an absolute maximum of 10 rental properties which stifle short term rental investors trying to scale. DSCR Loans have no such limits

Flexible Qualification and Underwriting – Conventional Lenders are harshly limited in any flexibility on qualification, while Private Lenders can (and do frequently) make exceptions