When you’re financing your deal through a private lender, you need to understand what private lenders are looking for in a borrower. Knowing this information benefits you in many ways. You can increase your chances of getting approved or even get better loan terms. Read our blog below to give you a headstart!
What is a Private Money Lender in Real Estate Business?
When you’re starting out in real estate investing but have limited capital and experience, your next best course of action is to start to find private lenders. A private lender is a person or a company who’s willing to let you use their money so you can invest in real estate. They could be a local hard money lender, other real estate investors in your network, or perhaps a family member. Whoever they are, you need to get off on the right foot with your private lender in order to build a strong relationship with them.
Unlike conventional lenders, private lenders don’t solely rely on your financials or your credit score. That’s the beauty of private financing! With a profitable deal on the horizon, you can come forward to apply for a loan. The requirements and terms of each lender may differ from one another but are almost always flexible.
Private Loans Are Asset-Based & Trust-Based
Essentially, a private loan is an asset-based and trust-based transaction. Private lenders set various criteria to evaluate your application. They don’t like complicating things like most bankers do. They only want to know if they can trust you with their money and whether your real estate transaction makes sense or not.
Most private money lenders would agree that the property and the numbers can only mean so much. That’s why besides requiring a formal appraisal, bank statements, and a logical exit strategy (among other basic documents), they also often consider who is the borrower. They look for certain traits to assess whether a borrower is going to blow it or make it in real estate.
What Do Private Lenders REALLY Want To See In You?
Themselves!
It’s a myth that opposites attract. There have been many studies that suggest we are attracted to people who share the same views, beliefs, and traits as ourselves. Shared values are often where the foundations of trust are built. At a psychological level, having commonality with other people helps satisfy our primitive need to have a logical and consistent worldview.
That’s why private lenders will be more comfortable lending to people who have the same traits as they have. A lot of private lenders are real estate investors themselves, so they have a good grasp of what it takes to succeed. They want to see themselves in you. As a private lender myself, here’s a shortlist of what I personally look for in a borrower:
- Patience
- Deep passion
- Robust work ethic
- Ambition
- Creativity
- Flexibility
- Eagerness to learn
- Confidence
- Self-determination
- Humility
How to Become the Preferred Borrower
Real estate investing is not simple, not even remotely easy. There are many variables that contribute to your success, but a good way to start is to develop these traits. Invest in your personal and professional development. You can do this through books, webinars, personal coaching, and of course, learning from your experience. The payoff comes with becoming a preferred borrower to any private lender.
Where to Find a Private Lender
Finding a private lender can be challenging but is definitely doable. If you need help finding a private money lender, get in touch with GL&L Holdings. We are a family-owned private lender that can come up with flexible terms to help you invest in real estate. We will go “above-and-beyond” to make your deal work!
