You’ll find a wide variety of private lenders out there. That’s just the nature of our industry. Some will be able to offer money and actually close on-time, others will not. Some will help you grow to be very successful, others will not be as honest. I always suggest asking your local real estate investors. Many of our clients can be found every week at the courthouse steps buying foreclosures. Show up to your local courthouse, introduce yourself to a couple of bidders and ask who the most reputable lenders are in the area.
As for how to close the deal, we try to keep lending pretty simple. Most borrowers come to us with a property already under contract asking for a loan. Equity is our focus so we don’t require income, tax returns or the whole nine yards. We’ll research the property in 24 hours, determine what amount we’ll lend up to (usually 65-70%), pull your credit to see if you’re a decent payer (we look at credit history more than score), and issue a commitment letter in 48 hours. We can get our borrowers to settlement in 5 days. In the 20 years we’ve been doing business, we’ve never missed a closing that we’ve committed to. If we don’t operate in your area, you’ll want to ask around to see what private lenders have the best reputations in your area.
A couple extra bits of advice to insure you can close the deal:
1) If you want to put the property into an LLC, be sure to get your company documents (articles of organization) in line and proof that the LLC is in good standing with the state (all payments and filings are current). In most cases, the lender may still require you to personally guarantee the loan.
2) If you’re looking for funds to renovate the property in addition to acquisition financing, work with your contractor to create a detailed renovation budget and draw schedule. This will allow us to see the extent of the renovations you plan to make and structure the loan to match your project goals.
A last note, don’t freak out about fees. Ask the lender to explain each one and what to expect if you cannot payoff the loan in time. A $100,000 loan at 12% interest may seem high but if you can pay off the loan penalty-free in 3 months, you’ll only pay $3,000 in interest with the upside of making $25,000 on every property you rehab & flip. This is why we have borrowers coming back year after year. Once you find a reliable lender and once you successful payoff a couple loans (establish a track record with them), getting a loan will be like taking a walk in the park. We treat our repeat borrowers like VIPs.