HML or PML or Conventional financing?

[Sunil Sharma]

Hello Forum,

I need your guidance in understanding what is better option when it comes to financing the commercial properties (multifamily rental apartment bldg.) for around $400K between Hard Money Lenders and Private Money Lenders and conventional Lenders (Banks)? Why am I getting lower interest rates from PML than HML? Is there any catch that I am unable to understand? Also what all should I consider while financing thru HML or PML? Sincerely Appreciate your answers and suggestions.

Thank you!

Sunil

[Michael Ablan]

@Sunil Sharma Welcome!

1. HML - Should only be used to bring down deals quickly and to finance the rehab. These are always short term loans of 6-12 months, thus the high interest rates. They don't make money lending money at 6% if you only keep the property for 3 months.
2. PML - Anything goes.  This is just an individual or group of individuals who are tired of watching their money under perform in the market, or rot away in banks.  The terms and interest rate are entirely up for negotiation and are determined by the goals of the individual.
3. Banks - Long term financing.  Anything from 15-30 years. Their goal is to lock money up at the market interest rate and either sell the investment to the secondary market, or keep it on the books and collect the interest rate.  This is the obvious choice if you don't have access to a PML willing to loan their money for the long term.