Private Hard Money Lender
Private lenders are often referred to as “hard money” lenders. We beg to differ; our money is “easy” not hard to get. Private lenders are individuals with money available to fund “non-standard” real estate loans. These types of loans are primarily short term with interest only payments on properties with a minimum of 30% equity or a loan of no more than 70% ARV or after repaired value.
The amount of equity is the most important criteria for the lender. Private lenders will only loan on properties with a minimum of 30% equity or a loan no greater than 70% (ARV). Because the lenders money is protected by the equity in the property, the borrower’s credit history, job history and assets are less important. These short term, interest only loans have an interest rate of 12% plus, an upfront origination fee of two points.
So, why do real estate investors use private loans? Speed and flexibility are the main reasons. In order to secure the best deals, the real estate investor must be able to pay cash and close quickly. Private loans can be funded in just a few days. Often times, the real estate investor will need to borrow the money for repairs of a distressed property along with the purchase of the house. As long as the loan amount is not greater than 70% of the after repaired value (ARV) of the property, an investor will be able to borrow the money for the repairs as well. Unlike conventional loans, private loans provide flexibility and are often the only option when the borrower and/or property do not meet the conventional underwriting guidelines.
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