How to Find a Private Money Lender in Australia?

Many real estate investors have never heard of or are not well versed with the term private lender. They may be all too familiar in their dealings with banks, having their credit pulled, and waiting 30-45 days to close on a property. That is a standard purchase and as a real estate investor, you should be anything but standard. We are known to be creative creatures. As you move along in your real estate investing career, you start to realize that there has to be a quicker way to purchase properties without all the red tape. So you start to educate yourself about alternatives, namely private money lenders.

Typically, a private money lender will require an application fee, an inspection or appraisal, 5-7 points on the amount borrowed, and an interest rate approaching 15-18% when lending on investment properties. Yes, there are plenty of different terms depending on the hard money lender but all in all, you’ll most likely see figures like those represented above. Recently, some hard money lenders require a pull of your credit report and score. Um… if I want my credit pulled, I’ll go to a bank. Along the way the private money lender might have “draws” where you wait to receive a portion of the rehab money while the property is re-inspected. If the re-inspection goes well, you’ll get more money to rehab. You may have to pay for the added inspections or draws. Loans are often held up to six months and the hard money lender will want to see that you have a couple of exit strategies. This basically means that you either sell the property or have the credit score to refinance (if I could refinance, I would have bought it through the bank anyway).

Private lenders are a different breed. They are sometimes called a private money lender or private investor. Truth be known, it is usually an individual who wished to remain a silent partner. This person can be a family member, friend, someone that you’ve met through networking, or perhaps through your marketing efforts. Although they may lend money to you or your business, they have no intention of swinging a hammer or going to the local hardware store to help with your rehab. As a real estate investor, you may have private lenders who lend specifically or the purchase of the property, for the rehab only, or for both. What they do need to be able to do however is act quickly. Meaning, if you find a deal and present it to the private lender, they need to be able to help you close on the property within 7-10 days.

Whereas a hard money lender has an application fee, looks for points, and high teens as an interest rate, most private lenders are satisfied with making 10-12% on their money. To them, it sure beats 1-2% on a CD and what we’ve seen with the stock market over the past 2 years. Also, folks with IRA’s can move their money over to a self directed IRA and become your partner. They lend money realizing the risk/reward and the individual or company that they deal with. So how might you convince a private lender to work with you? Actually, you should not have to convince anyone. As a real estate investor, simply show them work that you have done in the past, complete with pictures, videos, and all numbers (buy, rehab, sell) that go along with the properties. Do you have a formula for purchasing investment properties? What is your exit strategy. If a potential private lender can equate what you’ve done in the past with what you may be able to do in the future, your past actions will speak for themselves.

Having access to a private lender (or number of private lenders), allows you to make cash offers on properties. A cash offer equates to a lower offer in any real estate market. A major plus is where the real estate investor is dealing mainly with foreclosed properties, the banks that own these properties would like to see a quick sale. So, a real estate investor who works with a private lender may offer $50,000 cash on a property. Another buyer may come along and offer $55,000 but this individual will need to get a loan. The bank is more likely to take the cash offer.

The end result is that private money lenders offer real estate investors the opportunity to purchase properties quickly while giving themselves a passive investment that may result in double digit returns. Truly a win-win situation.