Terms of private / hard money lenders

[Diana Borova]

Hi everyone!

This is my first post. I am getting started in the game of flipping as well as buy and hold properties and wanted a better understanding of how private/ hard money lenders work.

When paying back the loan... does it start right away? How long does an individual have to repay? What do monthly payments look like?

I do understand that they are generally a higher interest rate and short term.

Thank you everyone !!!!

[Bob Woelfel]

@James Golden is right on. Each lender is going to be different, but most HML will require interest only payments each month until the property is sold or refinanced. Interest will start the day you close and is calculated like any other loan. In my opinion, HML's bring a lot of value to the table. Not only can they finance your project, but they are another set of eyes on the deal and most have systems in place to help protect you, especially from working with contractors by requiring lien waivers, etc.

Now if you had a relationship with a private lender then everything is negotiable.  Some lenders who know and trust me don't require payments at all.  They simply get their lump sum plus interest when I sell or refinance.  While private lenders are great, if you don't have any experience and you are borrowing money from someone who doesn't know anything about RE investing either you are missing out of that second set of eyes.  My two cents.