The loan we love to hate:
Private financing. What we used
to think of as throwing our clients to the sharks has changed dramatically
these last few years. When banks were so
tight they squeaked it was the private sector that came to the rescue more than
once. While rarely anyone’s first choice
due to their higher interest rates and fees they offer some pretty enticing
advantages over bank financing. Need a
loan closed in 72 hours to make your deal happen? Forget the banks. Call in the private cavalry to save the day. Those higher interest rates look pretty good
when the alternative is losing the deal.
Not all private money firms are created equal however. Lucky for us there are some respectable firms
right here in town…
It’s true. Looking for private money can feel like swimming w/sharks. But, we’re
lucky to have several good private money firms in Eugene .
One of the oldest and possibly best known is Gallic Financial often
touted for not having pre payment penalties. After all, most of the time when you need this
type of financing it’s a short term fix.
I’ve dipped my own ladle into the private money cauldron more than once
and I’ve yet to be sorry. We bought a
duplex for a song at the bottom of the market and it would never (and I mean
NEVER) have qualified for any kind of bank financing due to its condition. Just as important the seller needed cash and
needed it now. Enter the private money
financier. The duplex has since been
remodeled and refinanced and a grateful nation thanks the private money folks
at Gallic for closing that particular investment emergency.
What works for private money and what doesn’t? Some folks think that bad credit = private
money. Not so fast. Private money companies don’t want a bad
credit risk any more than any bank. Any
bad credit better be well explained, in the past and unlikely to reoccur. What private money lenders are looking for is
the one that falls through the cracks at the bank. An odd property. A unique employment situation or funds to
close coming from an unusual source.
Something that makes sense to everyone but a bank. And lately there’s been no shortage of those
kinds of deals.
Private money folks have been busier than anyone else
during the financial squeeze of the last few years. And because of that they have become more
selective in the types of deals they are interested in funding. A limited supply of money means they can pick
and choose a bit more than in yesteryear.
Don’t be shy about calling them on any deal. I’ve always been told to call, or have my
borrower call, if it even looks like there is a deal to be made. The private money guys (and gals) tend to be
creative and think outside the box.
Maybe they can cross collateralize more than one property. Maybe they need a cosigner to feel
comfortable. Whatever it takes. They are masters of creative
financing. Just make sure you have an
exit plan.
Eric Lundberg - NMLS #261588
President, Chinook Mortgage Ltd - NMLS #261588
541.302.3210
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