Yes, we know, it sounds kind of silly to be a private money lender yet tell our clients to avoid private money lenders. Right? Well, we know how we do business. But, we also know we aren’t the only private money lender.
Just like in any business, there are companies who’s reputation means everything to them. And there are other companies who want ever last one of your nickels and dimes.
At CEB Capital, we want to ensure that even if you don’t decide to work with us, you are still educated when choosing a private money lender.
So, read these red flags before you apply:
- Upfront fees: This is very tricky and the biggest way “lenders” rip-off potential clients. There are lenders out there that will charge fees for everything under the sun. You may even have to pay before approval. That means there’s a chance you pay big and still don’t get funded. Try to look for lenders who’s fees are part of the loan so you ensure you’re getting funded before you’re paying the private money lender.
- Sky high rates: Sure, 100% financing sounds glorious. Who wouldn’t want to buy a house, remodel it and sell it without a dime out of their own pocket? But, you would ultimately want to walk away with more dimes in your pocket, right? A lot of lenders charge astronomical fees in order to finance 100% of your project. Then your bottom line profits are eaten away into nothing. This means you’re working to flip a home for weeks or months and walking away with no profits. I’m sure this is not why you’re in the fix and flip business.
- No follow-up: Things move very quickly in the real estate industry. When you’re talking closing dates, appraisal appointments and proof of funds letters you need to know you can count on your lender to communicate a timeline with you. If you’re working with a company that doesn’t return your calls or give you a timeline, you need to cut ties. Time is money and you don’t have the luxury to hurry up and wait.
- No help. First of all, a private money lender only wants to work with experienced investors. They don’t want to “waste their time” with newbie investors. They definitely don’t want to spend their valuable time teaching inexperienced flippers the tricks of the trade. Make sure, experienced or not, that you work with a company that takes the time to get to know everything. This will help all of you be successful.