Private Money Lenders Houston

[Amber Koontz]

Hello all

I'm working on a checklist for approvals for FHA loans and Private Money Loans. I think I have researched enough on FHA. What would you say are things I need to make sure of for successfully obtaining private money lender's help?

[Darrell Shepherd]

First off, Private money is different from hard money- Hard Money is pretty much only for rehabs, the interest is cost prohibitive for long term holds.

Second, a lot of "hard money" lenders aren't true collateral lenders so I dont really consider them Hard Money. As recent as a year ago, the best money in Atlanta was 4 pts and 13%, 65% LTV, 20% participation and then they wanted a 640 credit score and two years taxes to qualify...huh? Thats pretty ridiculous terms with those rates, in case you dont know.

Hard Money SHOULD be true collateral lending.  The property gets you the loan, you dont need to qualify.  That's the reason you give up the high money costs.  Doesn't always work out that way, but that's the concept.  

If you are talking Private Money, anything goes. Its whatever you and the lender come up with. Half the deal. 12%, 4%, 30%. whatever. I pay my main private lender 2 pts and 12%. I've got $100k+ from my dad right now at 0% and no paperwork, but we move real money back and forth a lot based on what we've got going on (he does rehabs too). There is no "private money" kiosk in the mall, you have to cultivate that stuff. Find someone with money and convince them to lend it to you. I started at over 20% APR on my first deal, then as we got more experienced and had more people wanting to loan us money and less places to put it, we went down to 12%, then 10% and no points. That was before the crash. Money dried up some, plus I like my lender to be happy so I just pay him the 2&12 now. At the end of the day its way more about the availability of money than the cost of money for rehabs. Long term holds are a different story. Saying that, I have never, ever had a private lender ask me for a credit report. They do go on reputation, though, so if you are driving a $1,500 dented car, owe money to everybody you know, and ask someone to loan you $300k to do a house deal, you probably wont get a yes...