Private Money Markets – Loan Options for Real Estate Investors

The key to successful real estate investing is your understanding of financing and lending. You MUST be able to leverage the money you own (or borrow) so you can put your capital to work.

There’s a lot of money churning around out there. Many different sources provide loans. The government and big banks are two options … but they may not be the best options for your particular situation.

That’s why we’re talking about private loans today … a smart option for non-owner-occupied properties that may not be eligible for a traditional loan.

We’ve invited an expert guest who’s worked in financing for decades. Listen in for a show that’s jam-packed with information! You’ll hear from:

  • Your loan-happy host, Robert Helms
  • His loanable co-host, Russell Gray
  • Private lender, Tony O’Brien

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What are private loans?

Tony O’Brien worked as a stockbroker after graduating from Michigan State. In 1995, he formed his own hedge fund. Today, he helps investors who are looking to buy properties by providing financing.

He’s got his thumb on the pulse of lending markets. We asked Tony the state of lending markets today.

Tony told us the market has gone through a number of twists recently, all of which are good for individual investors.

Government and big banks, wary after the crash of ’08, no longer provide money to real estate investors who want to rehab or flip properties. Thus the rise of private lending markets.

Most traditional loans operate inside Dodd-Frank guidelines, while most private loans operate outside, giving them more leeway. That means more leeway for you to find a loan with low rates and loan-to-cost ratios that range from 50 to 90 percent.

And there are more people willing to make private loans than ever before.

When Tony says private loans, do you hear high rates? Think again. Although rates are typically higher than traditional loan rates, private money pays off because it’s quick and nimble.

How do private loans work?

Tony gave us the nitty-gritty on how private loans work.

First, what do lenders look for? Tony says that first of all, they look for integrity and trustworthiness.

“There’s no such thing as a no-doc loan,” he notes. Investors must have documents to back up their financial status.

But people who come to Tony with a property that makes sense and the right amount of money can make a deal work.

What about making sure a property is the right investment?

If a property needs work, Tony expects investors to have a rehab budget in hand. Then he’ll appraise the property to see if that budget makes sense.

Including the appraisal process, Tony’s goal is to close in 10 days … a quick and painless process for both lender and borrower.

We asked Tony about rates, fees, and points. He told us borrowers will always pay two to four points for loans.

With a credit score above 650, borrowers can expect competitive rates.

Although interest rates may be higher than rates from traditional loans, Tony emphasized that if real estate investors can borrow money at one percent a month or less, they’ve hit a home run.

Especially for short-term loans, private money markets offer money that investors can’t obtain anywhere else.

But what about long-term rehab loans? We asked Tony how he deals with refinancing.

Longer-term loans … with terms ranging from 5 to 30 years … have to be rolled over to a different lending business. Tony offers his investors a free roll forward to 30-year mortgages and shorter-term flex loans.

While Fannie Mae and Freddie Mac may look like good options, they’re only available to buyers with W-2 income … something many real estate investors don’t have. And there is a limit on the number of loans you can get.

Why use financing?

We’re always mystified when we see investors who own the majority of their properties. They’ve tied up capital in their properties instead of leveraging financing to get the most bang for their buck.

It’s not a smart move.

Private lenders like Tony WANT to give real estate investors money … in fact, Tony tries to avoid rejecting investors who don’t qualify. Instead, he mentors them and helps them look for a team or another solution so they can achieve their dreams

“We’re careful, but also optimistic,” says Tony of his approach to lending.

Eighty-five percent of his borrowers come back to borrow again.

Tony recently published a book, The Comprehensive Guide to Private Money Markets. Want to get some more serious knowledge from Tony on how to borrow private money … without worrying about your rate? Listen in to get access to Tony’s guide … and more info geared toward helping YOU make more money in real estate.

More on private money markets

As opposed to a traditional mortgage application, Tony’s loans require minimal information … a simple application, documentation of your current employment, and a statement that shows what you currently have in the bank.

“It’s not intrusive, but it does make you accountable,” Tony says of the process.

We’ve talked on the show about the role of investors in helping areas bounce back from natural disaster.

We asked Tony how he’s positioned to help investors in markets like Florida and Houston that have large numbers of flood- and hurricane-damaged properties.

“We aren’t afraid of damage,” Tony told us. “It’s a numbers thing.” His lending company is positioned to start lending heavily in both locations.

Tony also told us about his new program, Money Club.

Tony realized that investors are a breed unto itself … and wanted to create an organization that benefits real estate investors specifically.

Members in his club get access to no-point loans, market information, and foreclosed property listings that are priced to sell by banks.

“It’s a one-stop shop,” says Tony.

For our last question, we asked Tony to tell us the most important things investors need to know about private money. He said:

  1. “It’s available, and there’s no limit.” With the right deal, investors have a sure-fire way to get money. Tony says he can offer a loan 85 to 90 percent of the time.
  2. “Money isn’t free.” Rates are higher than those you’d get from the government. Points and paperwork will always be part of the equation … you can’t expect something for nothing.

Hard-to-buy properties aren’t so hard to buy anymore … not with private money.

Unraveling the mysteries of money

Big-brained people like Tony O’Brien help us unravel the mysteries of money.

Many of you may have thought there’s only one on-ramp to the investors’ highway … we hope learning about this lending category has changed your minds.

Almost 10 years later, we’re still digesting the fallout of the 2008 financial crisis. The key to success is getting money to market.

Private money markets provide a huge opportunity to do value-added real estate.

And although you may pay slightly more to get access to that capital, you get the opportunity to invest in otherwise un-buyable properties with money that is quick and easy to access.

Enlightened? Then go out and make some equity happen!


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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

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