Private lenders usually lend to borrowers with little regard to the specific property because they already have an existing relationship with a borrower and view the lending situation as relational rather than purely business. This can render terms and conditions very favorable for the borrower. A typical example of a private lender is a family member loaning money to another family member for the purchase of a property.

Historically, “sophisticated” rental home investors were limited in their financing options to the four financiers we already covered. In 2013, however, Wall Street firms established new lending companies to offer investors a competitive alternative. Since then, even more firms have entered the market. The new lenders are a cross between traditional mortgage companies and hard money lenders. They offer the benefits of traditional real estate lenders such as low fixed rates and long amortization periods and the benefits of hard money lenders such as non-recourse (i.e., no personal guaranties), unlimit- ed amounts of loans, package loans, and asset-based loans (vs. personal income).

Key Variables:

Interest Rate Market rate

Term Flexible

LTV Negotiable

Key Variables:

Interest Rate Market rate

Term 5 to 30 years

LTV Up to 85%

Underwriting Lax

Guaranty Negotiable

Future Borrowing Capacity Limited to lender's discretion

Underwriting Asset based

Guaranty No

Future Borrowing Capacity Unlimited


When available, seller financing can be the best form of credit. It is typically the least stringent and least costly, so it is usually the first-choice method of financing a purchase for long-term investors. How it works: Sellers that own the property “free and clear” (i.e., with- out a mortgage) can accept less cash than the purchase price at the closing and allow the buyer to pay the remain- ing purchase price amount in cash over a predetermined time period (i.e., the seller carries the note). If the seller has a small mortgage balance, they can oftentimes accept a sales price that pays off the mortgage and then give the purchase a second mortgage for the balance. Owners typically finance the sale of their property to earn interest or as a concession to close the deal.

Key Variables:

Underwriting Lax or non-existent

Interest Rate Market rate or below

Term Flexible

Guaranty Negotiable

LTV Up to 100% or the amount on the second mortgage

> Continued on :: PG 97

Douglas Skipworth, CPA, CFA is the Co-Founder and Principal Broker at CrestCore Realty in Memphis, TN. CrestCore manages over 2,500 units for approximately 500 individual investor clients, of which Doug- las and his business partner Dan Butler are the largest. Connect with Douglas at

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