As an investor you may be looking to close on a deal quickly, and you don’t need a 30 year loan for an easy 3-6 month flip. By choosing to work with a private lender you are given a bit more flexibility to work with. However, just like any other loan process, it is still possible to mess up, so here are a few tips on borrowing from a Private Money Lender:
- Be up-front and honest with your lender.
If something from your past comes up from a source other than yourself it could damage the relationship and your chances of closing a loan. If you provide all the information that they request, rather than having the lender find it out later and asking you about it, it will save time for everyone, as well as give you a chance to explain your past rather than letting the lender make stronger judgments.
- Patience is key.
Yes, private lenders are going to move faster than a traditional lender, but by being overly pushy and checking in too frequently or too aggressively you may actually be distracting the lender from getting the loan completed. Typically the lender should be the one following up with you letting you know where your loan is at in the process. So take a breath, and trust that we know how time sensitive the deal is.
- Keep things realistic.
Having large goals are great to shoot for, but having realistic goals is even better. We want to see you achieve goals and not just claim you can do everything and more.
- Keep your word.
This may go in line with the keeping things realistic, but if you state that you’ll have a portion of your work completed before you request a draw you will be expected to have that amount completed. If you fail to perform you could hurt your integrity, and the relationship with the lender could also be hurt as well.
- Find an experienced local lender.
You know how there is a “small business Saturday” to promote shopping at local stores in your community, so the money stays in the local economy? You can do the same with your lender, but you’ll also get the experience of someone who is invested in seeing the community you are working in thrive.
One last tip to keep in mind: private money has different rules. No matter where the lending is coming from there are regulations and rules associated with it, and if you’re working with a private lender they may also have other rules to follow so make sure you know them, and are able to work with the in place if necessary.