Finding ways to get a private money loan is easier when you understand how it is different from a traditional lender, the possible drawbacks, and how it actually works.
A Faster Alternative To Mortgage
Private Money Loans usually come from individuals or organized lending companies that provide real estate loans to investors who can not get traditional financing. These companies can finance your real estate deal faster than commercial lenders. Here are some of the reasons why they can do that.
- Private Money Lenders do not adhere to credit evaluation benchmarks as your traditional banks.
- Because they are local establishments, They can be more flexible in evaluating your real estate deal.
- They do not focus solely on the financial capabilities or history of the borrower, and they put more weight on the value of the property offered for a mortgage.
- They are also usually local enterprises that have been involved in the real estate industry longer than you might think.
- They are experts in the local real estate market, and they can even give you free consultations on your deal. They work fast because they are independent of big banks.
Downsides of Private Money Loans
Private Money Lending companies take more risks for you than traditional lenders do. Because of this, prepare for some downsides when you choose to avail of these loans.
- Private money loan rates, usually from 7% to 15%, are higher than the rates for traditional banks.
- Be prepared to shell out origination and processing fees or points that range from 3% to 5% of the amount you borrowed.
- Your required equity on the property is usually higher.
Advantages of Private Money Loans
However, it is not wise to let the downsides overshadow what you can benefit from them in return. Your chances of getting that remarkable real estate deal increase exponentially the faster you can get funding for it. Here are some attributes of private money loans for your benefit.
- Release of loan funds can happen within 15 days, as long as all documents are in order.
- Interest-only monthly amortization.
- Fast fund release of rehab construction draws.
- Flexible terms and conditions based on borrower needs.
- Your real estate investment experience is a factor.
Securing an Approval
Despite the long list of mortgage requirements and documentation you need to submit for a loan application in a traditional bank, sometimes you will still be asked to give additional documents as further proof of your financial capabilities. Private Money Loans for real estate, on the other hand, will make it easy for you to secure funding from them, as long as your deal is a viable business proposition. Furthermore, your deal and the property play a central role in their loan evaluation. Private money lenders also bank on your experience in real estate investments. Your credit history and financial documents take only secondary roles in your loan evaluations.
Making the Process Easier For You
Here are some ways you can do to make it easy for you to qualify and obtain a private money loan.
- Be prepared to present the details of your real estate deal. Have documents ready showing the details of the rehab costs, including the materials and contractors, and how you plan to draw on the funds as the rehab progresses.
- A Financial Statement will help the lender understand your financial position for the particular real estate project. It will give the evaluator a good look at how your project can turn a profit.
- Include in your proposal how much equity you are willing to put into the investment. High equity means that you are committed to and believe in your project.
- You should be able to present a team from whom you draw support for your projects. Your team should include brokers, contractors, and suppliers.
- Present a list of your projects and accomplishments, both current and finished projects. The list will serve as a showcase of your portfolio and real estate investment experience.
- Prepare a comparison table or analysis of the prices of houses in the area with nearly identical designs, make, and specifications. Also, note how long these properties have been in the for sale or rental markets. Show how your acquisition compares against these.
- Lastly, have an exit strategy. Whether you are into fix-and-flipping or rentals, it is best to show the evaluators how you plan to pay off the loan.
How To Make It Work
Private money loans for Real Estate can be easier to obtain than loans from traditional banks. However, you must still be able to satisfy the requirements of private money lending companies to be able to secure funding. With relatively higher interest rates and higher costs, you would want to maximize your gains from the project. Having a comprehensive plan for the rehab will keep your project on track. Stay true to your timeframe, maintain your budget as much as possible, and resolve any unexpected issues as economically and practically as possible. Any delays on the project mean a cut on your projected profits.
Private Money Lenders in Houston, Texas
There are different approaches to a loan, and these differ as much as private money lenders differ from each other. Any questions you have in mind, or any help you may need to secure the real estate deal of your dreams, we will be more than glad to help. GL&L Holdings, with more than 20 years of real estate investment experience, is open to your funding requirements. Talk to us, and we will even give you free consultations on your project. Call us now at 832-770-9415 or send an email to info@gllholdings.com. You can also fill up an online form for pre-qualification.
