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The Best Private Money Lenders Do These 6 Things

Blog | LYNK Capital

The Best Private Money Lenders Do These 6 Things

Posted on April 27, 2018

Private lenders play a significant role in providing renovation and construction loans to real estate investors. When selecting a private lender, what types of things should you look for?

The best private money lenders...

 

1. Have Experience

Be sure you find a lender who is familiar with the type of project you’re completing. Many lenders specialize in specific project types, and you want a lender who can help make yours a success. Ask prospective lenders for case studies or examples of projects similar to yours that they’ve made loans on and be sure to ask if those projects were successful. Check out our portfolio of recent closings here.

2. Are Responsive

Make sure that your lender quickly responds to your questions and concerns. Throughout the course of your project, you’ll likely interact much more with your private lender than you would in a traditional non-construction loan, and you don’t want your lender to slow down your project.

3. Are Flexible

Is your private lender willing and able to tailor a loan to your specific project’s financing needs? Private lenders have much more flexibility than banks, so make sure you find a lender that will work with you and help you throughout your project. 

4. Provide Local Knowledge

 Is your lender familiar with the dynamics of the market in which you’re buying? A downside of larger national private lenders is that they may underwrite your loan from a far-away office, causing them to treat your loan as more of a commodity. Regional or local lenders will often be more familiar with local markets and may even be able to help you with advice on local design trends and recommend reputable contractors in your area.

5. Have Competitive Rates

It goes without saying that interest rates and fees are an important part of any loan decision; however, don’t lose sight of the fact that the short-term nature of renovation and construction loans means that differences in interest rates may not mean big differences in dollars over the course of your project. Always be sure you consider all aspects of your construction lender and don’t fixate solely on rates and fees – and remember that a project that moves quickly and seamlessly is the best way to increase returns. Learn more about comparing construction and rehab loan rates here.

6. Provide Clear Loan Terms and Requirements

Your lender should be able to provide you with an upfront list of the loan terms, fees, and documentation requirements. While basic loan terms may be similar across lenders, documentation and property eligibility requirements can vary widely. You don’t want to find yourself in a situation where you’ve spent weeks working on a loan that won’t close. Be sure to ask questions about terms such as prepayment penalties, extension fees, construction draw processes, and the types of documentation required.

WOW your lender with an amazing loan application cover letter... download this template!

 

Learn More 

At LYNK Capital, we work hard to make the renovation and construction loan process easy and straightforward. You can learn more about what to look for in a private lender by visiting our FAQs or by contacting us

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