Real estate investors looking to grow their investing businesses beyond the limit of their own capital and credit often have questions about private money lenders in PA. For example, you might be wondering quesions like: How are private money loans different than other forms of financing? How do you qualify? Where can you find private money lenders?
Here are answers to some of the Frequently Asked Questions about private money lenders in Pennsylvania.
1. What is a private money lender in PA?
There are many ways to invest in real estate and make money. For investors who are looking for capital for their deals, they may want to work with an investing-savvy individual or firm to lend money. Meanwhile, some investors fund loans because they want to participate in real estate investing but don’t want to actually flip houses themselves so they’ll extend funds to other real estate investors who are making deals and flipping houses. The lenders do this because they are looking for a good return and they know that private money loans to experienced rehabbers are safe investments which are secured by a promissory note on the property being developed.
2. How is a private money loan different from a hard money loan (or a bank loan)?
While banks offer lower interest rates, they have a more difficult approval process based more on the individual’s credit score rather than the property plan and they do not act quickly. Typically, hard money loans come from smaller (non-bank) businesses who specialize in lending to investors. And, private money loans may come from individuals (although it’s technically true that hard money lenders are a type of private loan as well). Hard money lenders and private money lenders typically charge slightly higher interest rates than banks, but these lenders provide shorter loans and are also well-versed in working with investors. Both hard money loans and private money loans are secured with promissory notes on the property and they would typically have much shorter terms.
3. What are the advantages of dealing with private money lenders in PA?
While banks refuse to loan money for properties in poor condition, private money lenders are far more likely to understand that these are exactly the kind of properties real estate investors are looking to flip. Like the investor, the private money lender knows money can be made by purchasing a house cheaply, fixing it up and selling it for a good profit. Private money lenders in PA will typically have fewer qualifying requirement than other larger (bank) lenders. They are more concerned about the profit potential of the subject property than the borrower’s credit score. The better your track record of flipping homes profitably, the better your chances of securing good private money loans at good interest rates.
4. How do you find private money lenders?
Referrals is one of the best ways. Talk to other flippers, real estate agents, and contractors you know who work with other flippers. You can try to connect online at Bigger Pockets or by using services like Lending Club. Also be sure to talk with any hard money lenders you’ve dealt with previously. Private money lenders in PA can provide the capital you need to close more deals and grow your real estate investment business. Don’t spend all your time struggling to find money for your deals when what you really want to be doing is acquiring deals and rehabbing properties. Private money lenders in Philadelphia will help you get farther faster in your investing business by eliminating the task of searching for money so you can focus on the rehab.