Financing Your Deals| Private Lenders vs Hard Money Lenders

Watch to learn how I financed my fixer-uppers, the difference between private lenders and hard money lenders, and which is the best option in my opinion.

Channel, hope you’ve had a good week so far   about how i used a hard money lender to   i’ve used a hard money lender and in  depth about hard money lenders and the  and private lenders. just a quick note, private  what is a hard money lender? so a hard money  lender is basically a professional lender.   there are lenders,

Someone who will lend you money  based on the property that you’re working on.   so in my case let’s look at the example. so this  property, like i’ve talked about in the past,   the hard money lender in this situation,   they’re going to ask you questions like okay   and what’s the potential arv? now based on  those

Two numbers; the rehab budget and the arv,   they will evaluate if they want to lend you money  on this deal. obviously they’re also going to look   at your credit score, they’re going to look at  your amount of experience and they’re gonna make   sure that you have the right structure in place  in terms of your llc and business

Checking account   all that stuff because obviously they’re gonna  have to collect their monthly payments from you.   lender looked at this deal and said okay   goziem, gozvestor this deal we’re gonna lend you  about 175k and let me break down the numbers. 120k   property and then 55k will be the rehab budget  

Remember is that they’re gonna add interest rates.  so for my deal the interest rates were about 9.9%.   9.9%. the origination points were 2.5%,   money lenders there’s going to be all these   of and watch out for-documentation fee $995.   so we have to remember those fees  because you have to add them up and see  

After you add all those fees and then the monthly  interest payment for this deal was about $1450.   and the length of the loan, remember what i said  the loan amount was 175k. the length of the loan   penalty for this loan. so you take all that,   about, the 120k for the purchase price,   up all those other fees that i talked

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About.   origination fee which is $4,400, the documentation  fee $995, the title fee $875, the escrow $395,   and then the insurance 2k. you add that all up  and then you see what your total cost for that   money is and don’t forget the interest payments as  well which for my situation it was about $1,450.   as you can

See from this example with all the fees  i’m talking about, and all the interest payments,   you know that hard money lenders are not cheap,  they’re not cheap. so it is very very important   that you analyze your deal and see after all these  fees and after you deal with the selling cost   and the closing cost and the real estate

Agent  fees commission are you going to make a profit   out of this? because these things matter,   we’re not here to lose, we’re not here to lose  money. we’re here to create win-win situations so   be very very careful when you’re going for hard  money lenders. you make sure that the deal that   give you a good amount

Of profit once all is   said and done and that’s why you have to add all  those fees because after you’ve added all the   and i have to pay the agent fees,  what am i left with? what are you left  with? as you can see things can get quite   careful and make sure you do the numbers.   i know many people don’t like to do

Math but when  you’re an investor especially when you’re a real   estate investor, math is very important and that’s  why i always talk to my fellow investors. i always   get feedback, sit down with a few people, run  the numbers you know get a second opinion,   beauty of being in a community right you can   get feedback

From other investors who are much  more experienced and you know much more savvy.   i won’t say much more savy than i am but at least  they’ve been there, done that and they can say hey   about this, how about that, so that’s just   my advice to you. always do your due diligence  so what’s the difference between a private 

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Well a private money lender is somebody  they’re just people. it could be your  it could be people that you work with, it could  be anyone that you’ve built a relationship with.   and the cool thing about private money lenders  is that all these fees that we talked about,   if they trust you, if they believe that you can  

Provide them a return on their investment then  they’re willing to lend to you. and the cool thing   talk to them and tell them what your plan is   it all depends on the amount of money that they’re  willing to give knowing that they’re going to earn   a return on their investment once that particular  deal is done. and here’s a

Cool thing about   being a private lender. i’ve been a private lender  on a few deals to some other investors in the   community that i’m involved with and i’ve earned  10% returns, sometimes 15% return on the money   that i’ve lent to them for their fix and flip  deals. so it’s pretty cool and remember this,   that you

Lend to, it has to be backed up   with the real estate, with the property and make  sure you have what i call a document signed.   something called a promissory note, a promissory  note binds the money that you’re lending   private money lender is that you could either  earn equity or you can earn interest. the deals  

I get paid every month based on the interest that  i’ve said i’m gonna, i’ve signed with the investor   and then once the deal is closed i get my initial  funding plus the interest payments that i’ve been   getting every what every month for six months  or seven months or eight months depending on the   terms you’ve signed with

That investor. as you can  see being a private money lender is pretty cool   and i’m also, in the near future, i’ll be working  with private money lenders, people who i’ve   worked with, people who i’ve built a relationship  with and we’re going to be working on deals,   going to institutional lenders with all those  

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So starting out you most likely will be using  hard money lenders but make sure you shop around,   terms because my first deal i used a hard   money lender that did not provide a rehab budget.  my second deal, in terms of my fixer upper, i used   a hard money lender that provided rehab funds.  so every lender is different,

Every hard money   lender is different and that’s what hard money  lenders are. there are different criteria,   different ways that they charge you; pre penalty,  no pre-penalty for paying it ahead of time.   which like i said what is a private lender?   a relationship with, it could be a colleague,   basically

It’s someone who is trying to earn a   return on their investment instead of it sitting  in their 401k account or their stock market not   earning a lot, they could lend you that money and  know that hey i can earn more, earn an interest,   closed. so treat your private lenders with respect   you know be clear to them, let

Them know what  they’re getting into, when the project is   likely to get finished and what they’re likely  to get back in return and remember two things.   there could either be an equity partner whereby  they’re going to earn a percentage of the profits-   that’s what i mean by equity, or there could be an  interest only

Partner basically you’re giving them   let’s say after the deal is closed, let’s say the  deal is closed and you earn 40k of profit, well   but if they’re an equity partner they’re  so that’s that with private  money lenders, hard many lenders,   hopefully that was clear and i’ll see you soon.  don’t forget to subscribe and

Leave your comments,   obviously this is not a comprehensive course   on real estate investing but i’m just sharing  with you my knowledge, my wisdom, my experience,   and hopefully you’re getting value from that so  take care and i’ll see you soon. bye for now!

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Financing Your Deals| Private Lenders vs Hard Money Lenders By Gozvestor