Private lenders are non-institutional person’s (individual or a company) that lend money, secured by a deed of trust or note, used to fund a real estate project. A project can be a renovation, construction of a new property or re-purposing an existing property. Such investors rely on relationships as a basis to lend money. They will typically not lend to a person they do not know in person, or who has no one in the lender’s circles who can vouch for the borrower.
Finding private private lenders is not the toughest part. Proving that you are worthy of their investment is. As much as private lending relies a lot on relationships, relationships will only get you to the door. From then on, the investors will evaluate your credibility and make a decision on whether your investment is a risk they are willing to take. Typically, they do not do blank checks. Most private lenders will lean heavily on prior performance. Also, many private lenders are success real estate investors. They make great partners for first time investors. The best way I know to find private lenders is to search recorded mortgages via this link and/or attend a SWFL REIA meeting.
Many private lenders lend the self directed IRA. We have a corporate sponsor that acts as a custodian Click here for more information.
As a general rule, the riskier the investment, the more interest private real estate investors will demand. Interest is a form of security for the investors. It shields their money in a trade-off design: the riskier the borrower (risk here being in terms of the duration of the loan or the credit status of the borrower) the more interest they will charge.
Should things not work out with an investor for whatever reason, bridges should not be burned. Word goes around really quick in the private money lending world. Credibility is key. Should word float around that a borrower cannot be trusted or cannot sustain a good working relationship with a lender, the same will work out against the borrower in future transactions. It is imperative that the borrower maintains a good line of communication, especially for future endeavors.
Quality private money lenders can open doors for a borrower not just because of the money they can throw at a business but because of the networks, they have access to. Should be treated with uttermost decorum and they will, in turn, return the favor tenfold.
We look forward to meeting you at a meeting soon!
Click here for membership information
Get our meeting notices and market data emailed to you.