Private Money Lending Do’s & Don’ts
Now what I want to do is give you some rules of thumb that I think are absolutely critical when getting private money lending from any source.
The first thing you need to do is thoroughly evaluate the lender. You should check references, testimonials, business history (if not an individual) and reviews. I’ve seen far too many cases where people get snowed over and lose a few hundred bucks up to a couple grand by an unscrupulous private money lender.
You should also consider getting a full understanding of all the fees you will be required to pay at the closing table. I see many investors get blindsided by the fact that they have to pay points to close the loan.
Don’t be surprised if your application gets declined or you are unable to get the loan amount you requested. Far too many newbies don’t know how to properly calculate the after repair value of a home. They’ll just look at Zillow or some other website that says a home is worth “x” amount of dollars and they think that there’s a big profit margin.
But when the private money lender evaluates the property, a completely different (usually much lower) after repaired value is returned. The lender will base their decision off of this evaluation, NOT what you think the property should be worth.
Don’t argue with the lender and try to get them to change their mind because it won’t happen.
Don’t expect to submit a loan application as a way to try and get a lender to evaluate a potential deal that you think you might want to invest in. And certainly don’t call them and ask them to tell you what they would give you for financing on every property you are considering.
A private lender can’t give you the details of the terms of a loan until they look at the property and do an evaluation. That’s why you get ranges on the website. You are probably thinking that you can’t make an offer until you know if you can get the financing you need… what you need to do is become more educated on evaluating properties so that this isn’t an issue.
The people who know what they are doing and succeed in this business put in offers before they ever seek financing. All you have to do is write your contract with the appropriate contingencies that protect your earnest money.
How can they do this you say? Well, they know that private lenders will give them the money they need if the deal is good and they don’t have something like a bankruptcy or tax lien on their record. And if for some reason the financing on the deal doesn’t come through, they have their contract written that allows them to back out unharmed.
Private Lenders That You Can Trust
At the beginning of the article, I promised to help you find the best private lenders. One source that I highly recommend is Moolahlist.com. You can post up your deal for reputable private money lenders to look at and potentially contact you to get you funding.
What I also want to do is introduce you to my company, DoHardMoney.com.
At DoHardMoney.com, we specialize in financing real estate investors with private money and have been doing so since 2005. We have an extensive network of people ready to fund your deal in as little as 5 days.
Our sole focus is delivering fast and easy access to the most private money loan options available online.