Skip to main content

How Much Equity is Needed for a Private Money Loan?

When considering approaching a private lender to fund your deal, you might be wondering how much equity is needed. Keep in mind that a private money loan is a business loan that uses investment real estate property as collateral. It is not an equity investment in your project.

The money used to fund private money loans is from an accumulation of personal money of one or more private investors. A private money lender seeks to reduce the risk a private money investor(s) might lose should your project go south.

Therefore, when applying for a private money loan consider what you would need to know if you were the lender to be confident that the risk associated with a project is minimal.

The asset you use as collateral for a private money loan from a non-bank private money lender with Hand Over Fist Funding is typically the basis for the loan. The majority of private lenders or people demand that you have at least 35% equity in the property (a 65% loan to value LTV). There are some lenders who may allow as little as 25% equity (75% LTV) or less but they will have other stricter requirements. The precise amount of equity varies depending on the private lender and their investors, but it usually depends on the quantity and nature of the collateral in addition to your own financial status.

Many private lending organizations will take additional collateral as a guarantee on the loan if you do not own any equity in the project you are working on. You might, for instance, have other properties with sizable equity or other possessions that might please a private investor.

If you do not have much equity in your project, a private lender will consider your project a higher risk. When your project is a higher risk, they will look at your financial situation a lot closer. Higher credit scores, other assets for collateral, and your experience will all help in reducing the risk.  Some lenders will consider your relational capital when you have done several deals with them and pay the lender off then they will give better financing terms on future loans.

When you don’t have enough equity, you should generally look for an equity partner rather than a private lending group to fund your project. To find a possible partner it is recommended to participate in a regional real estate investment group.

Understanding Real Estate Private Money Loans

A private money loan enables a borrower to get a loan for business purposes in exchange for pledging their property as security. An investor or a group of investors may provide this loan. An investor like this could be a business lender, a finance firm, an online lender, or a broker like Hand Over Fist Funding.

A private money loan is used by people in the business of real estate investing for business purposes to buy a conventional residential non-owner-occupied home for rental, fix and flip, Air BnB, new construction for rental property, office buildings, apartments, multi-family homes or undeveloped land. Whatever the project is it must be used for true business purposes and not be owner-occupied.

The processing time for private money loans is one of the main benefits. Loans can sometimes be approved in as little as 7 days. Another benefit is that you can still get a private money loan even if an average run-of-the-mill lending source won’t fund it.

It might be challenging and tough to find private money lenders on your own. The typical real estate borrower frequently lacks a thorough understanding of private money lending, which makes it challenging to understand the procedure, loan specifications, and where to locate those private money lenders.

The good news is that you have located the ideal starting point for this quest. Hand Over Fist Funding has a network of over 6000 private money lenders ready to fund your deals. They have more money than they have deals. So go ahead and tell us about your deal.

Where does the money come from for a non-owner-occupied private money loan?

The money is raised from individual investors. A single investor or a group of investors could be the source.

How do I know if I qualify for a non-owner-occupied private money loan?

The loans are based on the asset and your real estate experience. The more experience you have the lower the risk. If you have less experience then your credit score may be used to evaluate the risk. There are many variables they use to determine if a deal is acceptable. The best way to find out is to have your property under contract then Tell us about your deal and we will see if your deal is a good fit for private money lending.

Do I need equity to borrow private money?

Yes and no. Private money loans are mainly determined by the asset you offer as security as well as the risk. Generally speaking, private money lenders prefer that you have at least 40% equity in the property. The precise amount of equity varies depending on the lender and investor, but it is always determined by the quality, kind of collateral, and the risk. Private money lenders may typically take additional collateral, like equity in another property, as a guarantee on the loan.

How do I apply for a private money loan?

Initially, the first step for any private money loan application is to have a signed contract, then find out if your deal is one the investors would be interested in by telling us about your deal.

At HandOverFistFunding.com we have a network of lenders that have all types of loans to meet your needs for your project. Such as bridge loans, rehab loans, multi-family loans, commercial loans, residential loans, apartment loans, construction loans, and a variety of other types of loans.

Tell us about your deal to determine what type of loan you are needing.

We at Hand Over Fist Funding are looking forward to hearing about what you have going on.

A Lender to Fund Your Deal

You’ve found a fabulous deal, and now comes the daunting task of finding a way to fund that deal. Banks have turned you down because the property doesn’t fit their criteria, or they have turned it down because you have used your credit one too many times in your real estate investments, leaving your credit score below the ideal expectation. Or they have turned you down because you make money with your business or investments, but on paper, on your tax returns, it looks like you are below the poverty level. These roadblocks can stop you from growing your business as quickly and as much as you would like to.

Now is the time to look to private money lenders. We have the money and we have the investors who want to invest in real estate deals like yours. Hand Over Fist Funding, LLC came into existence because we wanted to connect investors like you with the hundreds of private money lenders that are funding deals of all sizes throughout the country. They have the money, they just need more deals.

We at Hand Over Fist Funding, LLC, want to help you find the funds to get your deals closed. Go ahead and tell us about your deal. Fill out the pre-application form or call us at 1-800-437-1982.