Types of Private Lending

[Dave Poeppelmeier]

Hello, I had a question regarding Private Lending/Hard Money. I have spoken with a couple of local lenders and what I keep hearing is 20-25% down. I have 3 SFH and have performed a flip, so I have a better idea of what I'm doing and have experienced the Money Pit house that gave me a lot of "experience". That house killed our Reserves but now all 3 houses cash flow. I want to keep building my portfolio but now I don't have a lot of money up front. Has anyone ever heard of lending with less money up front but a much higher interest rate so I can refinance on the back end and essentially "pay" then? Or is it 20-25% or go home. Thanks!

[Jeff Rabinowitz]

@Dave Poeppelmeier, if the interest rate is too high it may violate the usury laws in your state. However, almost any structure you can imagine is possible if you develop a relationship of trust with a private lender. Maybe, your best answer is not a lender but an equity partner. You financial partner could purchase the property and you divide the profit in your project according to your joint venture agreement.

I have been pursuing a strategy tailored for buy and hold investors (landlords) that turned into a short term situation once. I have purchased houses then resold them on land contract terms to my buyers (my buyers are all investors, non-owner occupants, so I don't run afoul of Dodd-Frankenstein). The price of the house is stepped up for the land contract so the interest rate can be well under usury rates. The investor has purchased the house so they have immediate access to rehab or improve as they wish. I am quite happy that my buyers improve the properties. In the one situation, my buyer obtained access to enough funds to cash out the land contract in a couple months and I was happy to allow that (I even gave him a bit of a discount on the purchase price).