Dec 19, 20223 min read

Private Money Lenders - What Do We Look For?

Updated: Feb 9

A private money loan, also known as a direct hard money loan, can be the answer for you if you need to raise money for your next real estate venture. Investors should look for these loans from a private lender like Stratton Equities rather than a traditional financial institution for a number of reasons, the main one being that these people and organizations typically have fewer restrictions and more liquidity than traditional loans, and grant funding much more quickly as a result.

Given that information, you might be curious about the criteria that private lenders use to evaluate loan eligibility.

What Do We Look For?

The following are a few characteristics that private money lenders typically take into account to determine whether investors should be granted a hard money loan, however, each one is unique and will have distinct requirements. There are also some pointers on how to perform at your peak in these areas in 2021 included.

1. The Degree of Your Commitment

Private money lenders want to know that you have the same amount of investment in the property you want and are prepared to lose just as much if it doesn't work out. You can demonstrate to lenders your commitment to your investment by proposing to make a greater down payment.

2. The Property's Potential Profitability

Private lenders search for a cash-positive or profitable asset; they look for the possibilities that your potential property possesses. For instance, lenders are more likely to give you the money you need if you are a fix-and-flip investor and can demonstrate that you can buy the property for a low price, make few or no repairs, and profit significantly from the rehab project.

Additionally, if you are unable to sell the property or repay the loan, the lender will be better off selling a good property immediately in order to recoup their investment than waiting for someone to take the risk of buying it as-is and at a lower price for a property with little profit potential.

Provide estimated home values for the neighborhood so lenders can understand how much value you may potentially add in order to convince them that your property has a high potential for profit. Lenders may be persuaded that taking on the risk is worthwhile by a financial illustration of the property's potential for appreciation, which brings us to the third and last consideration for private lenders:

3. Your Risk Level

Your real estate history and level of investment experience are two more factors that private money lenders consider. Do you have experience making improvements to houses for sale or rent? Have you ever made a real estate investment?

You are not any less likely to be approved for a loan from a private lender if you are new to real estate investing. Increase your down payment or present the lender with any thorough plans you have for the property, including your budget and estimates for upcoming upgrades. Private lenders can see your dedication as a new investor by seeing how much time and effort you have already put into researching the property and your plans.

Take Advantage of Your Next Opportunity with Stratton Equities

Private money loans are an easy, quick way to get the real estate capital you need, whether you want to buy and sell properties or seek a bridging loan.

Why wait for a conventional loan if you have your eye on a home when you can close even quicker with a private money loan from Stratton Equities? It is easy to understand why Stratton Equities is the leading choice for ambitious real estate investors with private money rates ranging from 7.46%-10.49%.