Direct Private Lenders
Loans Provided by a Direct Private Lender
What is a Direct Private Real Estate Lender?
Oftentimes, the terms hard money lender and direct private real estate lender get used interchangeably due to the similarities both possess. Both will lend based on the “hard asset” or the property/collateral itself, but private money lenders take into account additional factors beyond just the property such as the borrowers’ credit history, available cash, and income. Private money lenders are not banks but rather companies that loan investors the capital they need to finance their real estate investment deals.
What Properties Do Private Lenders Loan On?
Depending on the private lender, they can loan on commercial or residential transactions. For the residential side of investing, private lenders can work with investors on either single-family properties or multi-family deals. Some specialize in fix and flip and rental properties, thereby providing their borrowers with up to 90% of the purchase and repair costs of the properties, in addition to experience and expertise that will help their borrowers further grow their businesses.
Why Should An Investor Apply for a Private Real Estate Loan?
Applying for a private real estate loan is a great option for real estate investors because of the flexibility at which they can work with borrowers. They provide the speed investors will appreciate when trying to close a loan, especially for a fix and flip, faster than the lengthy time frame banks typically take to complete a loan. Additionally, banks tend to not lend on rehab costs, so a private lender may be a better choice.
Also, private lenders can offer investors the freedom and ability to scale their businesses beyond what banks or other hard money lenders can provide. Where banks make simultaneous deals more difficult and limit investors to only ten properties to loan on, private lenders usually will not have limits on the number of properties an investor can be working on.
What is a Direct Private Real Estate Loan?
Private money loans are provided to investors for their non-owner occupied property investments such as a fix and flip or a long-term buy and hold rental. For fix and flip properties, these loans are usually short-term, with the expectation to be paid off within one year. For rental properties, private real estate loans can include a 30-Year Fixed-Rate loan as well as Adjustable Rate Mortgages (ARM’s). These loans can be used to either purchase the property, refinance or get cash out of an existing one.