Hi Anthony!
This is a great question and gets asked frequently. As someone who does private lending and knows hundreds of private lenders across the country, I am going to say "it depends". First, private lending is very personal, so what one lender might want could be totally different from another lender. It's about listening to what they want and offering a way to supply the solution. For example, I lend in the 2nd lien position, only under very strict guidelines. I also don't have capital deployed very long - think months not years. I want the churn of doing loan after loan right now, where as another investor might want more of a set it and forget it model to lending because they rely on the monthly payments to help cover their own living expenses. If you want to build your own private lender army, it starts with listening to what they want.
Generally, most active investor think only about the rate and length of the loan. There are several more aspects that could possibly be negotiated that could be far more beneficial. For example, I have not required monthly interest payments in the past for borrowers, in exchange the interest rate is increased by 2 points. I have yet to have a borrower turn down paying a bit more in interest to NOT make monthly interest payments because I fund fix and flips, which means they are hemorrhaging money the first few months of ownership. You can also offer a personal guarantee to the loan in exchange for a lower rate if you have a lot of personal networth and signing as an LLC (which may be required depending on where the property is located).
When thinking about talking to those in your network about the possibility of lending, you can offer ways that you are willing to help protect their money - lender's title insurance for 125% of the loan amount, hazard insurance that provides total structure coverage in the amount equal to or greater than the loan amount, etc etc. After hearing these things, people in your network may feel safer lending to you, and that could result in a lower rate. It really depends on your business model, location you are in the country, the LTV you are looking for, the length of time you are looking to keep the private capital.
