Private money lenders, also known as hard money lenders, typically offer short-term loans for real estate investment purposes. These loans are often used by real estate investors who need quick access to capital or who do not qualify for traditional bank loans due to their credit history or the nature of their investment project. Private money lenders offer a variety of loan types, including:
- Fix-and-Flip Loans: These loans are used to purchase and renovate a property for resale. The loan is typically based on the after-repair value (ARV) of the property.
- Bridge Loans: These loans are used to bridge the gap between the purchase of a property and the sale of another property. They are typically short-term loans that are repaid when the borrower sells the existing property.
- Construction Loans: These loans are used to finance the construction of a property. They are typically short-term loans that are paid off when the property is sold or refinanced.
- Rental Property Loans: These loans are used to purchase or refinance a rental property. They are typically based on the income generated by the property rather than the borrower’s credit history.
- Land Loans: These loans are used to purchase raw land. They are typically short-term loans that are paid off when the borrower obtains construction financing or sells the land.
It’s important to note that private money lenders typically charge higher interest rates and fees than traditional lenders, due to the higher risk involved in these types of loans. It’s also important to thoroughly research and evaluate any potential private money lender before accepting a loan, to ensure they are reputable and offer fair terms.