Guide to Private Money Lending

Private money lending is a popular method of borrowing, especially in the world of real estate. But how does it work? Is it safe? Who do they lend to? 

The following demystifies this alternative method of financing a project, covering all the FAQs and some more specific information.

How Private Money Lending Works

• Guide to private money lending: FAQs
• Guide to private money lending: more in-depth detail

Guide to private money lending: FAQs

The basic premise of private money lending is that you borrow from either a wealthy individual or a private organization/entity. You might also hear it referred to as non-traditional lending or a hard money loan. The biggest takeaway is that you’re not borrowing from a bank, so the lender is free to provide funding without the restrictions that more traditional financial organizations have.

• Is private money lending regulated? While banks are subjected to a lengthy list of rules and regulations, private moneylenders have fewer constraints. They do have to follow certain state laws, such as how much interest can be charged and, perhaps, the amount of loans that an individual or company can make.
• Is private money lending safe? When you borrow from a reputable source, then yes—this is a perfectly safe method of borrowing.
• Do private money lenders charge high interest rates? Because there are fewer restrictions on who they lend to (such as proving your income or tax returns), interest rates are usually a little higher than what you can achieve from a bank.
• How do you qualify for a loan from a private money lender? Rather than taking your net worth into account, private money lenders focus on whether the purchase makes financial sense. For instance, is the property you want to purchase, rehab, and rent out likely to make a profit? If the answer is yes, then you’ll likely qualify for a loan.
• How quickly are funds made available? Because there’s no need to do detailed financial checks, a typical loan might be available to you in 14 days or less.

Guide to private money lending: more in-depth detail

The term “private money lending” covers a wide subject. It can include borrowing from a private individual—either a wealthy person who does this for a living or, perhaps, a friend or family member. It also covers so-called “hard money lending”. This refers to organizations that exist specifically for this purpose.

• How long are the terms for private money lending contracts? These are typically much shorter than bank loans or a mortgage. A private money loan might be over a few months, a year, or perhaps a little longer. They don’t tend to be long-term loans. It’s accepted that, for an investment property purchase, once any work has been carried out then the loan will be repaid—either through refinancing (for a BRRRR loan) or the sale of the property (fix & flip).
• Will I qualify for a private money lending loan if I have poor credit? In most cases, your credit rating won’t be considered—so the answer is yes.
• What about if I’ve already got a conventional mortgage? This doesn’t usually make any difference—even if you’ve borrowed up to your maximum net worth. The whole ethos behind private money lending for investment properties is that it’s the financial good sense of the deal, rather than the individual’s details, that determine the loan’s viability.
• Do I have to divulge my tax and personal financial information to get a private money loan? Generally, no. This isn’t taken into account.

Get the Best Advice and Guide to Private Money Lending with BRRRR Loans

Private money lenders are not all made equal. There can be massive differences between interest rates, closure times, lender/borrower requirements, etc. At BRRRR Loans, we pride ourselves on offering the very best options when it comes to the purchase of real estate.

Whether you’re looking for funding for a classic BRRRR project, need a bridging loan to tide you over while you move home, or perhaps need the money for your next fix & flip, we can help.

Discover more at  https://www.brrrr.com and get in touch today for more info.