Looking for private lender recommendations

[Martha Daisley]

Hello

I have bought two investment properties in the past the conventional way but now i would like to look into a private lender or private investor for financing. I dont know much about private lenders. Can someone explain how the process works? Sounds like you get the loan with the private lender then you refi?

Also, if anyone knows of any private lenders in the orlando, fl area can you recommend? I dont know if they necessarily have to be local.

Thanks!!

Martha

[George Despotopoulos]

Hi @Martha Daisley, 

Congrats! Those two properties should help you to pre-qualify with a lender and will help propel you forward!

Private lender has a few different definitions on the forum. It seems the most appropriate is to designate an individual who lends out personal money as 'private lender.' But, I've also seen non-bank direct lenders referred to in this way as well.

Nonetheless, typically when you go the private lender route you're looking at more traditionally structured loans with rates higher than those from a bank. The fees should be modest and you will have a long time to pay it off. These loans may or may not carry a prepayment penalty as they are often long-term financing so refinancing comes 5-7 years down the line, or whenever the prepayment penalty period ends, to avoid paying further fees. 

Hard money is usually where you rate-refinance. The hard money process is quicker and more bare-bones, getting to closing usually is under 30 days. The lender will not require much from you and your credit score may not even play a factor in determining your rate (outside of any major debts). Hard money loans will typically be 6 or 12 month loans, with opportunities to extend this time-period for a certain % of the loan amount. These loans carry with them higher interest rates, most likely in the range of 10%-16%. The typical focus when underwriting hard money loans are your experience, the market the property is in, projected after repair value of the property, and the loan to value you're requesting. The higher LTV expect higher rates. In this area of lending, lenders usually require a showing of substantial experience in rehabbing or flipping. Sometimes they even require a business plan or some evidence that you have done your homework and can take on the project.

In order to utilize either of these products, you will need to pre-qualify like you have in the past with conventional lenders. The process is pretty much the same, it's the information that's required and underwriting that will differ greatly.

There's a bit to cover in terms of the process but I'm happy to field any questions or get on a call to further explain, contact info is in my profile  and below.