How to Get a Private Money Loan
Are you in need of quick approval for your private money loan?
Do you want clear terms and conditions tied to your potential loan?
Then a private money loan is what you need.
To get one, you must meet the qualifications and find a trusted lender.
Private Money Loan Qualifications
Qualifying for a private money loan can be much simpler than qualifying for other loans.
When flipping a home, a private lender will assist in finding the after repair value (ARV) of your property of interest. By analyzing your rehab plan for your fix and flip project and the costs involved, the lender can determine the ARV of the property.
Lenders will also consider the loan-to-value (LTV) ratio of the potential deal, as well as your current liquidity status. Liquidity can be a helpful tool for the lender to know how much additional capital you have on hand that can go towards paying on loan and covering any unforeseen renovation expenses.
If you meet these qualifications, it’s possible to get quick approval on your hard money loan.
Once you’ve gathered this information, the next step is to find a trusted lender.
Finding a Private Money Lender
There are two key ways to find a private money lender.
1) The first is to network. Become a member of local real estate groups and attend events. Talk with your fellow investors – they’ve been in your exact shoes before.
Where do they get their private money loans? What lenders have they worked with in the past? Who do they highly recommend? Word of mouth is the best method to compile a list of recommended lenders that can fund your fix and flip project. You’ll gain insight into their reputation by learning what their clients really think about them.
2) The second way to find a private money lender is to do your research. Online searches such as “[location] private money loan” will yield several local lenders that could help secure your loan. Go directly to their websites to learn more about their services. Online directories of lenders can be a great way to find those that service your immediate area.
To be the most efficient in your search to find a private money lender, merge the two methods. Before a networking event, identify a few lender options you’d like to ask around about that have a stellar online reputation. Once you’ve been to the networking event, research any additional names recommended to you by other investors.
Once you’ve narrowed down your list, it’s time to vet the lenders’ loan process thoroughly. This allows you to watch out for red flags that caution you against taking out a loan with certain lenders. These red flags include a lender who:
• Ask for fees to be paid upfront
• Have little to no transparency throughout the loan process
• Don’t provide a clear list of terms and conditions for the loan
• Not being available to answer your questions
• Require an appraisal
When you find a lender you can trust and their qualifications are met, they’ll then work with you to set up a private money loan.
Importance of In-House Loan Funding
Some lenders don’t actually have the money they’re lending in-house. Rather, they’re borrowing the funds from a 3rd party and then potentially loaning it out to you. In this situation, 3rd party lenders have a large degree of control over the money (sometimes all the control), not just your lender, who is really simply a loan broker. Your project could be derailed based on their processes and decisions and not those that you have previously discussed with your selected lender.
When interviewing potential lenders, make sure to question where your private money loan funds are coming from. Is it all handled in-house? Set yourself up for success by partnering with a lender that cuts out the middleman.
The process of choosing a private money lender should be treated seriously. It’s one of the most important decisions you’ll make in the fix and flip process. Finding the right partner can mean a transparent, smooth process throughout the duration of your project!
Get Your Private Money Loan from DFW Hard Money
Have confidence in your private money lender. All lending decisions are 100% made in-house at DFW Hard Money. What you see is exactly what you get; there’s no hidden go-between.
Get in touch today to learn more about our private money loans for real estate investors. Check our article on the different types of loans HERE.
We fund real estate projects in Texas, Colorado, Missouri, Kansas, Tennessee, Georgia, Oklahoma, and North Carolina.