What is a Private Lender?

By December 23, 2020 January 7th, 2021 Real Estate Investor Tips

Due to lack of flexibility and slow processes, banks make it difficult to obtain real estate investment loans. Private lenders play a crucial role in real estate investing, as they provide access to capital to allow real estate investors to be successful.

What is a Private Lender?

A private lender provides financing options to real estate investors seeking to fix and flip a property or rental loans for buying and holding a property.  Since the company is a privately owned company, they term private lender is often used.

A private lender is different than a traditional bank. The underwriting process is usually less personal income driven and more focused on the asset (the property or properties collateralizing the loan). It is now extremely common for real estate investors to look outside of traditional lending routes and choose to use private money lending to finance investment properties. Using private funds to invest in real estate can be beneficial for both the investor and the private lender, allowing the active investor to purchase a new investment property while the private lender receives a return on investment.

Why Do Borrowers Prefer Private Lenders?

We take a deeper dive into this topic by explaining 8 Advantages of Hiring a Private Lender. There are definitely a few integral differences leading to real estate investors preferring to work with private lenders

  • Speed of Funding Process
  • Less Stringent Credit Requirements
  • Simple Underwriting Process
  • One Lender for All Loans
  • Lend in Different Locations
  • Multiple Simultaneous Deals

Given the growth of the private lending market, the interest rates can now be competitive with traditional banks. Many banks will not lend to real estate investors that are looking to purchase properties in multiple locations or may even put a cap on the number of properties each investor can finance.

What Property Types Do Private Lenders Finance?

Generally speaking, private lenders finance non-owner occupied real estate. This can be either for residential or commercial properties. The most common buckets for property types financed by private lenders are:

  • Single Family Residences
  • Multi Unit Properties (2-4 Units)
  • Small Balance Multifamily (5-20 units)
  • Commercial 

What Strategies Do Private Lenders Support?

Private lenders have specifically built their loan programs to fit the strategic needs of real estate investors. Working alongside borrowers, private lenders are able to tailor their programs for the investing activities they are discussing on a daily basis.

  • Single Property Refinance 
  • Rental Portfolio Acquisition or Refinance
  • Acquisition Bridge w/ Rehab (Fix and Flip)

You’re Ready: Apply for Your Loan

LendSimpli makes applying for a rental loan easy and clean. You can access your secure borrower portal and begin by filling out the application. Within the portal you will clearly see the documents you will need to upload and where they should go. If you have any questions, you can message our team directly from your secure borrower portal.

Most borrowers looking for a long term financing options to help grow their rental portfolio can choose a 30 year fixed rate rental loan. This loan program can be used to purchase new rental properties or to refinance properties that are currently owned. Use what you have learned here and apply now and get a quote tailored to your situation.