Our Beginner's Guide to Private Real Estate Loans

The Different Types of Private Real Estate Loans

There are two main types of private real estate loans: bridge loans and permanent loans.

Bridge Loans

Bridge loans are short-term loans that are used to finance the purchase of a property until the borrower can get long-term financing. For example, if you're buying a property at an auction, you might need to take out a bridge loan to complete the purchase and then get permanent financing later.

Bridge loans are typically interest-only loans, which means that you only have to pay the interest on the loan for a certain period. After that, you'll need to start making principal payments.

Permanent Loans

Permanent loans are longer-term loans that are used to finance the purchase of a property. These loans are typically fully amortized, which means that you'll make both interest and principal payments over the life of the loan.

The terms of permanent loans can vary, but they typically have a term of five years or more. And, like bridge loans, they can be interest-only or fully amortized.

2 Ways You Can Use Private Lender Loans

Now that you know a little bit more about private lender loans, let's take a look at how you can use them to grow your real estate business.

1. Use Them to Purchase Properties

One of the most common ways to use private lender loans is to purchase properties. As we mentioned earlier, private lender loans can be used to finance the purchase of both residential and commercial properties.

If you're looking to buy a property, you can search for private lenders in your area. Once you find a few potential lenders, you'll need to fill out an application and provide information about the property you're interested in purchasing.

2. Use Them to Refinance Properties

Another way you can use private lender loans is to refinance properties. This can be a good option if you're looking to get cash out of a property or if you're trying to lower your interest rate.

To refinance a property with a private lender, you'll need to fill out an application and provide information about the property you're looking to refinance. The lender will then determine if they're willing to provide you with a loan.

If you're approved, you'll then need to sign a new loan agreement and make monthly payments to the lender.

3 Things to Keep in Mind When Applying for Private Lender Loans

If you're thinking of applying for a private lender loan, there are a few things you should keep in mind.

1. Know What You Need the Loan For

Before you apply for a loan, it's important to know what you need the loan for. Lenders will want to know how you plan on using the loan, so it's important to have a clear purpose in mind.

2. Shop Around for the Best Rate

When you're looking for a private lender, it's important to shop around and compare rates. Private lenders typically charge higher interest rates than banks or other financial institutions. But, there can still be significant variation in rates from one lender to the next.

3. Make Sure You Can Repay the Loan

Before you take out a loan, it's important to make sure you can repay the loan. Private loans typically have shorter repayment terms than traditional loans, so it's important to make sure you can afford the monthly payments.

If you're thinking of applying for a private lender loan, keep these three things in mind. By doing so, you'll be in a better position to get the loan you need and use it to grow your real estate business.

What to Do If Your Loan Application Is Denied

If your loan application is denied, don't despair. There are a few things you can do to increase your chances of getting approved the next time you apply.

1. Review the Reasons Why You Were Denied

The first thing you should do if your loan application is denied is to review the reasons why you were denied. This information should be provided to you in writing by the lender.

Once you know the reasons why your loan was denied, you can work on fixing those issues and improving your chances of getting approved in the future.

2. Shop Around for a New Lender

If your loan application was denied, you may want to consider shopping around for a new lender. Not all lenders have the same standards, so it's possible to find a lender who is more willing to approve your loan.

3. Improve Your Credit Score

If your credit score is the reason why your loan was denied, you can work on improving your credit score. There are a few things you can do to improve your credit score, such as paying your bills on time and maintaining a good credit history.

How To Find Private Lenders For Real Estate

If you're looking for private lenders for real estate, there are a few things you can do.

1. Ask For Referrals

One of the best ways to find private lenders is to ask for referrals from people you know. If you know anyone who has used a private lender in the past, they may be able to give you a referral.

2. Use an Online Directory

Another option is to use an online directory of private lenders. There are a few different directories you can use, such as the Private Lender Link Directory.

3. Attend Real Estate Events

If you attend real estate events, such as seminars or conferences, you may be able to meet private lenders there. Many private lenders are active in the real estate industry and attend these types of events.

4. Contact Local Investment Clubs

If you live in a larger city, there may be investment clubs that focus on real estate investing. These clubs can be a great way to meet potential private lenders.

5. Network With Other Investors

Another option is to network with other real estate investors. There are many real estate investing groups you can join, both online and offline. These groups can be a great way to meet potential private lenders.

If you're looking for private lenders, there are a few different options you can consider. By using these tips, you should be able to find a few potential lenders to work with.