When traditional bank financing may not be an option, borrowers may turn to private money lenders for financing. Private money is the process of lending money to a company or individual by a private individual or organization. This type of lending is beneficial for real estate properties or investment properties; particularly those that need repairs to bring them up to Fair Market Value (FMV). Banks or other brokers traditionally will not lend money for properties that need repairs to be brought up to FMV.
Another benefit of private money is that you can get the loan quickly. For example, if an investor wants to purchase a “flip property,” they will want to close as fast as possible to begin the repairs and make the most money on their investment. Traditionally, banks can take up to 60 days to close, but private money lenders can close much faster. At ReProp Financial, we understand your need for quick closings, and on average, our loans take only 5 to 10 days to close. An additional difference between private money loans and traditional bank loans is the payback period. While traditional bank loans have longer payback periods (up to 30 years), the typical payback period for private money loans is significantly less (average of 1-3 years). At ReProp, we offer an interest only Bridge loan with a payback period of up to 5 years.
Another aspect of traditional bank financing that real estate investors may want to avoid are the rigid conditions or constraints required by traditional lenders. Private money lenders are another way to avoid these constraints. ReProp understands client’s’ unique needs and circumstances, and will work closely with you to find a way to make the deal (loan) work.
The downside, however, to private money financing is that private money lenders may charge a higher premium for the added risk involved. One of our competitive advantages at ReProp Financial is that our interest rates, on average, tend to be lower than the national average. ReProp Financial charges an average interest rate of 5.99 to 9.99 percent in addition to points ranging from 2 to 2 ½ percent. Furthermore, we do not charge any additional “junk” fees, such as processing fees, etc.
At ReProp, we work directly with borrowers, receive referrals from mortgage brokers, realtors, and other market professionals, receive referrals from state and local community development and economic development corporations, and receive Bank “turndown” referrals–loans that fall just outside of the “Bankable” box.