Private lenders have more flexibility compared to a traditional bank. Much more, actually. Private lenders set their own lending guidelines, loan terms and property preferences. Private funds are primarily used to acquire a property, rehabilitate and flip. private lendingSometimes a property is in such poor condition that a bank simply won’t place a loan on it. That’s where private funds come in.

A private lender will consider most any real estate project from a simple single family home to an apartment building and all properties in between. The private lender can evaluate the potential in a property, look forward a bit then determine how the investor will repay the private loan, typically through a sale.

In return for this consideration, terms for a private lender will be tailored to the lender’s preferences but you can expect a down payment of at least 30 percent or as much as 50 percent if the project is a bit out of the ordinary or the lender perceives additional risk. So what happens when an ideal project literally falls into your lap unexpected and your private lender is asking for 50 percent down and you really don’t have that sort of cash immediately available? Cross collateralize other property you own.

Say that you need $250,000 to buy and rehab a home but the private lender wants $100,000 down. The lender can fund your project within days but the $100,000 is a problem. Offer to have other properties that you own collateralized in lieu of part of your down payment. Perhaps you own two single family homes both valued at $200,000 free and clear. Instead of selling the property, the private lender may place a lien on one or both of those homes in addition to a down payment from you. Once your project has been completed and sold, the private loan is paid off and the liens are released.