3 Things to Look for in Private Money Lenders

If you have made the decision to get in the investment property game, that’s a great move. Regardless of if you are planning to flip a few single-family homes or become a landlord by investing in a multi-family property, the first step is to determine how you will finance your project. After all, if you don’t have a clear idea of where your funding is coming from, you aren’t going to be prepared to make any offers on the property to begin with.

What you need to understand is that making real estate investments usually follows a different path that buying a primary home. Most investors use private money lenders. That’s because this allows them more flexibility and they will have the chance to build a business relationship that only becomes more beneficial for both people involved over time.

The challenge is finding the right lender. If you want your deals to move quickly and easily, then you need to do your research to find the right lender.

Three things you need to look for in a quality private money lender can be found here.

1. Responsiveness 

One of the biggest benefits offered by working with private money lenders over a traditional finance company or bank is that deals are usually closed much more quickly. In fact, it can be done in just days, instead of weeks or longer. This is why the lender you choose needs to be responsive. If you have found the ideal property, you don’t want to put it in jeopardy by working with lenders that take much to long to respond.

2. Transparency 

During any transaction, you want to make sure you know what’s happening each step of the way. Reputable lenders are going to ensure you remain informed, and they will also adhere to the guidelines and the regulations that have been set by the local or state government regarding the loan origination process.

3. Competitive Points and Rates 

When you are shopping for a lender, regardless of if it is for more traditional lending or from a private lender, one of the most crucial things that you need to consider is the points and interest rates associated with the loan terms. With that in mind, you also need to know what you are looking at. The points and interest rates for any type of single-family home mortgage from a typical lender are usually going to be significantly lower than the rates provided by private mortgage lenders.

This is because a traditional mortgage is given with the thought that it is a long-term investment. Lenders know they are dealing with fix-and-flip properties and investments. You can’t try to compare the rates of a private money lender to what a large bank offers. That’s like trying to compare oranges and apples.

You also need to think about the type of funding you are going to have to have. Certain fees and down payments are considered standard in the industry, but you should not be “fooled” by a company that wants you to put down a huge “engagement fee” as well as the typical fees.