Private money loans are privately funded mortgages that allow real estate investors to quickly purchase their next fix and flip property. The flip market can be tricky, but with the right private mortgage, financing a flip is much easier.
Traditional Lenders and Flips
One of the most difficult parts of the fix and flip business is finding the property. When flippers find that great deal and if they don’t have cash, having a reliable private money lender can mean the difference between buying that deal or losing out on a hard to come by opportunity. Traditional lenders and banks typically do not offer mortgages for fix and flips. There are several reasons, the property is in too bad condition, the bank cannot close the loan fast enough or the flipper does not qualify for the traditional mortgage.
The Private Lending Process
Private money lenders for real estate are not concerned with the property’s condition. Banks and traditional lenders require that all properties are in average to good condition. Properties in poor or dilapidated condition are not allowed. Private lenders are not concerned with the flippers credit and income requirements and qualifying are very lax. Private lenders are concerned most about equity.
Private lenders can fund their loans very quickly, within weeks and sometimes within days. Banks and traditional mortgages usually require at least 30 days to complete and fund the loan.
Private money lenders for real estate sometimes do not require an appraisal. An appraisal is always required by a bank or traditional mortgage lender.
Line Up Your Private Money Lending Source
There are private hard money lenders in your city or county. Search out “private hard money lenders’ and determine who specialize in flix and flip loans. Not all private money lenders for real estate arrange flip loans. Also, you need to determine how much of a down payment the private money lender will require. Most will require a large down payment, 25% and as much as 50%. There are several private money lenders, like GW Private Capital, that require a smaller down payment, 10% to 20%. GW Private Capital has arranged flip loans up to 100% of the purchase price on a case-by-case basis.
Before you start looking for your flip property, make some calls to private hard money lenders and line up your private money flip sources. Ask the right questions of these flip lenders: How much do you require as a down payment? Do you require that the buyer / flipper have experience? What are your typical interest rates? How long are your repayment terms? What are your costs? How many points do they charge? Do their loans have prepayment penalties? Do they fund the rehab costs? These are a few of the questions that you must ask before you place your trust in a private money lender with your deal.
To learn more about private money flip loans, give us a call.