Private money is used as the bridge or gap to acquire a property allowing the borrower to take the property from its current condition to its highest and best use.
The private lender is usually repaid from the resale of the property or the refinance of the property because the property now qualifies for more favorable terms and conditions offered by traditional institutional lenders.
Structured correctly, private money can be used on almost all property types, property condition or loan purpose.
Private Money Advantages:
Common Sense Underwriting:
Private Lenders underwrite the property and the story surrounding the deal, they are less concerned about making sure every box is checked, every “I “dotted and “T” crossed in order to securitize and sell a loan in the secondary market.
The market has many opportunities that require and investor to move quickly. The investor may have the credit and income to qualify for tradition financing but timing does not allow for 30-45 day loan processing so they use private money to capitalize on these opportunities, a private loan can close in as few as 5-10 days.
Private lenders will lend on “as is” condition, conventional underwriting has certain health and safety requirements and may require certain repairs to be made prior to lending on the subject property. Private money is less concerned about the property condition and more concerned with the likelihood and reasonableness of the loan purpose and the investors ability to bring the property back to marketable condition.