By guest blogger Anthony Dadlani; President of A Plus Real Estate
We all know and understand that private lenders, also called hard money lenders, are not inexpensive. Many charge very high rates along with upfront points, application fees, and appraisal fees on top. However, there are times where a private lender may be your only choice due to poor credit, insufficient income, choice of property/location or purchasing format.
Below are three examples when a private lender may be very beneficial.
You have found an ideal off-market property from either a wholesaler or highly motivate seller. Both want to sell the property quickly either due to a time constraint on the assignment contract or the financial situation. A traditional lending source will take months to evaluate and fund. A private lender can approve and fund most likely in a few days. Speed is very important in securing a great deal.
- You have found a great off-market flip situation; however, it requires work. A traditional bank will more than likely not take into consideration the after-repair value of the property and only fund at 60 -70% of current value. A private lender may fund 100% and provide some rehab funds in escrow as well.
We all know that auctions are a great way to find below-market and off-market opportunities. Many wholesalers use this format to get deals for their rehab customers. The biggest hurdle with purchasing in this format is the cash upfront requirement. A private lender can bring funds to assist or partner with you on these auction properties. It’s one of the best ways to use a private lender.
As mentioned, private lenders will no doubt cost you more than a bank. But in my opinion, a smaller profit on a deal is still better then zero profit if you can’t get involved. Use private lenders to fund your projects until you have saved enough capital to self fund.
We are glad to evaluate any property on any and all of the above points. Feel free to submit your property and requirements to us.
Best of luck in all your ventures.
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