FAQ's

1. What is the difference between a private money lender or hard money lender and that of a conventional lender?

Private Money Lenders
The private money lenders we use allow the investors to purchase great investment deals that the traditional banks normally turn down.  The standard banks want model deals which should be up and running, rented and in most cases no vacant neighbors are allowed.  Private Money Lenders finance the deals even if it is a total shell as long as the value of the deal is there and the Loan to Value (LTV) your borrowing is a max of 70%.  Example, deal is worth $100,000 so they will lend up to 70%.  The rates are higher and the points charged are also higher but if your deal makes financial sense the COST OF MONEY balances out. 

Conventional Lenders and Banks:
These institutions such as your major banks follow a very strict and rigid guideline when financing investment properties.  The guidelines are viable and logical yet in many cases the standard GOOD investment deal is not set up for a conventional loan.  They are deals that require construction, are in tougher areas, don’t look as appealing etc.  Nonetheless they are good deals that need you to make them better deals.  But major institutions do not want to take the risk so they typically not in all cases turn the deals down.  Yet if you qualify for a loan with the conventional lender the rates are very attractive and the points are very low allowing you to make more cash flow up front.  In many cases the conventional lender will require a LARGER down payment on the borrower behalf before they finance the deal. 
Both lending sources (Private and conventional) are viable.  The one you choose to is mainly decided on a per deal basis.  There isn’t one way to ALWAYS close a deal, there are many choices and it is our job and duty to our investors to find the best source to acquire financing for all investment deals located by Fiva Corp.

2. Why should I use a private money lender instead of a conventional lender if the conventional lender is going to be cheaper in points and interest rates?
Either lender may work for you, your job is to get the deal CLOSED in your favor.  Some deals require you to use a immediate source of money and financing while others allow a more flexible timeline to close the deal.  Private money lenders are somewhat of a CASH lender.  So if you make an offer CASH it is more likely that you get the terms favorable to you as opposed to offering to closet the deal through a standard bank which takes much longer and is subject to being turned down for a number of reasons.  Sellers and investors don’t like to tie up a deal based on financing terms. 

3. How much is the interest rate and points charged by the private money lender?
In most cases the interest rate is 16% and 6 points for the loan.  That is why you have to understand that the loans are short term and are best used to lock in the deal, close the deal and renovate the deal.  Once it is up and running you can then refinance into a conventional loan at a more favorable interest rate.