Top 5 Private Money Lenders for House Flipping in Florida
Private loans are a versatile option for borrowers, allowing much greater flexibility than a traditional bank loan can provide. However, as with any other loan, private loans always come with an element of risk. In Florida, house flipping is one of the very best ways to build wealth, with a fast-growing population propelling serious potential gains on the market; with backing from a reliable lender, you could turn an undervalued property into serious profit. In order to help you make your borrowing choice, let’s count down the top five private money lenders for house flipping in Florida.
Tell me more about private loans? What’s the difference, exactly?
In simple terms, it’s a loan from a private lender.
Banks have to deal with a great many regulations and bureaucratic processes that private lenders are exempt from, meaning that private lenders can often provide loans much faster than banks. Private lenders also have different interests compared to banks, generally focusing more on the property’s potential value than the borrower’s credit rating. These loans are designed to fulfill a very specific purpose and be paid off quickly, in contrast to traditional mortgages.
When would a private loan make sense?
- As noted above, private loans are very flexible, being exempt from many of the regulatory processes binding banks. Private lenders may be willing to renegotiate fees, interest rates, or repayment periods, while banks are generally very hesitant to budge.
- Private loans can be taken out very quickly, allowing you to strike while the iron is hot. In a growing real estate market, this could make all the difference for an investor.
- Private loans may be easier to obtain than bank loans. Banks tend to be very focused on the borrower’s credit, and skeptical of lending to foreign investors. Private lenders, in contrast, are mostly concerned with the potential returns on the investment in question.
Alright, but there have to be a few downsides, right?
- Private loans tend to come with a short repayment period. These loans are designed with specific investments in mind, which shouldn’t be an issue if the investment goes well, but can be a problem if it takes a long time to see returns.
- You may run into high interest rates and fees. Private loans are highly negotiable in comparison to bank loans, but many lenders will ask for above-market rates and fees in exchange for their service. Keep in mind that with a short repayment period, high interest rates aren’t necessarily the dealbreaker they are for traditional loans.
What do I need to keep in mind when borrowing from a private lender?
We recommend always keeping a close eye on your finances, of course. This is especially true if you’re anticipating a house flip, as there is some inherent risk involved. Never take out a loan you can’t afford, and always have contingencies in place. If you’re looking into flipping a house, we recommend performing a house flipping market analysis.
Your borrowing should always be predicated on a high degree of certainty that the investment will turn out to be a profitable one. Some investments may be riskier than others. For instance, a novice house flipper would likely be wise to avoid low-end markets where margins are slim and insurance can be very costly.
Why private loans make sense for house flippers
House flipping is a very time sensitive process, and these fast moving loans are a strong choice in a market where time is money. You generally want to purchase, renovate, and sell the property in as little time as possible; insurance, utilities, and taxes are all money down the drain for as long as the house is unsold.
The lending process can be very time consuming when it comes to traditional banks, especially for new house flippers whose credit history has limited relevance to the loan in question. Private lenders offer a way to speed the process along, potentially saving money further down the line.
Of course, this is not to say that private loans are the only option. They are a very strong option for house flippers, but every investor is different and you shouldn’t neglect to consider all your options.
What’s all this about a faster process, anyway?
One of the greatest strengths of private lenders is their ability to move faster than traditional banks, which tend to be caught up in regulatory red tape. However, what exactly does the funding timeline for a private loan look like?
It depends on the lender, of course, but it typically takes around seven to ten days. Private lenders can’t borrow from the Federal Reserve, and don’t have customer deposits at their disposal, which means they usually keep money on hand— meaning that money can be released sooner.
The chief drawback is that smaller lenders often have a limited pool of investors, and the lender may need to consult with those investors before a loan can be made. The other main reason for delays is appraisal, which has more to do with the appraiser than the lender. Once the appraisal is finished, the loan is likely only a few days away. Nevertheless, the lending process should virtually always move much faster than a traditional lender.
The top five private lenders in Florida. Let’s count down!
WLW Capital LLC
WLW Capital LLC offers loans up to $2,500,000, at interest rates between ten and twelve percent, like the above. Origination fees skew higher than average, from around two to six percent. The loan terms come out to between twelve and twenty four months, a relatively narrow range.
Based out of Tampa, this company was founded in 2015 and offers closing in as little as ten days.
Monroe Funding Corporation
The Monroe Funding corporation offers loans of up to $1,000,000, but interest rates are generally a little higher than average, typically falling between twelve and fifteen percent. Origination fees, however, are slightly lower at around one or two percent.
Based out of Fort Lauderdale, this company is best known for offering loans to investors interested in relatively small residential income properties of one to four units.
EquityMax Financial’s loan offerings max out at $1,000,000, with relatively high interest rates of ten to fifteen percent. Origination fees may be anywhere from one to three percent, and repayment periods can be as short as one month or as long as 204 months. (That’s seventeen years!)
They have been in business longer than most, with a record of twenty eight years. The company can close within a few days, and is relaxed when it comes to required documentation: lenders need not provide tax returns, bank statements, or FICO scores.
RBI Mortgages provides loans of up to $10,000,000, but interest rates come relatively steep at about 8.5% to 10.75% in a typical case. Repayment periods range from six to thirty six months, and origination fees clock in at anywhere from one to three percent.
RBI Mortgages, a Hallandale Beach-based private lender, lends to borrowers investing in residential properties, land, and certain types of commercial real estate. They close fast, and they are open to working with foreign nationals, as are many private lenders.
American Heritage Lending
Founded in 2004, American Heritage Lending has its origins in California, although it offers loans in Florida. $6 billion in hedge fund money backs American Heritage up, and they offer loans of up to an impressive $5,000,000 in order to purchase, flip, or build residential properties.
Interest rates are fairly standard, at between eight and twelve percent. Loan terms are a minimum of one year, or as many as thirty years— on the further end of that scale, this is more like a traditional bank loan than the usual private loan.
Hard Money Lenders IO
Headquartered in North Miami Beach, Hard Money Lenders IO offers loans to real estate investors and entrepreneurs of all stripes, but especially house flippers. We pride ourselves on flexibility and good timing, offering closing within 7 days. We tailor our loans to your needs, working to suit your specific investment.
We lend up to $5,000,000, and our interest rates typically fall between 9 and 12 percent. Our origination fees are generally around 1 to 2 percent. We are proud to offer our services to investors looking to rebuild their credit, as well as foreign nationals who big banks may turn down.
If you’re interested in a private loan, we offer quite a few different options, as well as resources to help you make your borrowing decision. Contact us if you have any questions or concerns, and we’ll get back to you in no time: we strive to help you save time every step of the way. We wish you the best of luck with your investments!
Florida is host to many different private lenders, and every lender is a little different; depending on your circumstances, one or another may appeal more to you. It’s always a good idea to consider all your options when looking for a lender, and don’t be afraid to ask around if you have any doubts.
With a trustworthy lending partner, you could turn a serious profit by flipping houses. Whether you choose Hard Money or one of our competitors, we wish you the best of luck in today’s growing market!
Adam Smith has spent the last 5 years in the Private Money Lending world helping real estate investors secure financing for their non-owner occupied real estate investments. When he’s not thinking about real estate, Adam is an avid Jazz music fan and fisherman.