Private money lenders offer short to mid-term non-recourse loans for investment real estate. Often called hard money loans, private loans are a way for real estate borrowers to obtain financing on properties that traditional banking institutions have too strict of loan qualification requirements to meet or often deny.
Private money can be used to purchase and re-finance investment real estate including:
- Sports, Entertainment, Religious, and Mixed-Use properties
- Retail properties
- Office properties
- 5+ Unit Multifamily Apartment properties
- 1-4 Unit Non-Owner Occupied Single Family Residential properties
Private money loans are made based on the appraised value of the subject property. This means that borrowers with subpar credit or bankruptcies may still be able to qualify for these types of loans. The subject property's debt service coverage ratio and cash flow will be considered when determining the loan-to-value ratio, interest rate, and term.
Private money loans typically take 10-15 business days to fund, which allows for a quick closing. To qualify for a private money loan, you will need a down payment of 20% to 30% of the purchase price, a letter of explanation of how the funds will be used with an exit strategy, and a 1003 loan application. Private money lenders will need to review a recent credit report for their files, although the funding decision is heavily based on the equity of the property and the borrower's ability to repay the interest over the term.