Frequently Asked Questions:
What Exactly is a Private Money Loan?
A private money loan is a short-term, asset-based loan that provides funding for acquisition and repairs on investment properties. These loans are funded by private individuals, like the investors behind Geneva Lakes Funding. Requirements vary by lender, however, most private money lenders are more concerned with collateral and equity protection, than borrower credit scores.
One of the greatest things about a private money loan is the speed at which you can get funded. Sometimes approvals can be granted in as little as 24-48 hours and settlements can take place in less than a week. Remember, however, that the lender will have to make an appraisal of the property, order and inspect title work, and have lender documents drafted. This could take anywhere from days to weeks depending on the circumstances but, in an emergency situation such as foreclosure, we may be able to speed up the process to accommodate you.
What Documents Do I Need to Get Started?
Before providing documents, you should first complete our Loan Application on the apply tab. Once we determine your loan fits within our lending guidelines, we will tell you what documents you need to provide. If you have an appraisal of the property, you may want to provide that to the underwriter up-front at time of application. This will help determine the viability of the deal. If we do not have your corporate entity documents on file, you will need to send those in.
Yes. If your real estate transaction requires a lending pre-approval letter, Geneva Lakes Funding can provide that to you, most of the time in the same day it is requested.
How Does a Private Money Loan Compare to a Conventional Loan For The Investor?
A private money loan is generally based on the after-repair value (ARV) of the asset, in contrast to a conventional loan, which is typically based on the actual value (AV) of the asset which is the value of the asset “as is” at the time the loan is made. The ARV is calculated based on the value of the real estate asset after the estimated repairs are made on the property. Typically, private money loans are meant to be quick turn-around or after-repair situations. Rates are typically higher than conventional financing, however, funding times are usually much faster and the loan criteria and repayment terms can be tailored to the individual situation. Conventional financing is best used for your traditional rentals and long-term hold scenarios. Many investors use private money as a way to secure the property in a short period of time, then refinance into conventional financing.
There are no “set” fee schedules. However, private money loans generally have upfront points. One-point equals 1% of the loan amount. Some or all of these points may have to be paid up-front, but many times we will let you build the points into the back of the loan (we will increase the loan amount to cover the points). You will have to pay for an appraisal of the property, some document preparation fees, and perhaps some underwriting and/or application fees. Any required fees will be disclosed to you up-front.
What Are The Advantages of Using Geneva Lakes Funding For a Private Money Loan?
We are hands on with our borrowers. We believe that customer service and transparent interactions are key to your success. These loans allow for a simple qualification process, faster funding, a more competitive offer, ability to offer multiple purchases, and leverages your buying power, to name a few.
How Do I Qualify for a Private Money Loan?
The main criteria for qualification is the evaluation of the property, repairs, and the ARV using comparable sales data. We make sure the borrower has cash upfront for closing costs and fees, but also cash reserves and/or collateral to support monthly interest payments and possible refinance costs. We don’t focus on your credit score or other documents typically requested by a conventional lender.
What Areas Does Geneva Lakes Funding Lend?
Geneva Lakes Funding lends on Real estate non-owner-occupied property only (residential or commercial) in Wisconsin, Illinois and Virginia. Please give us a call to see if you are in our lending area. We prefer to lend locally, within an hour to an hour and a half of Lake Geneva and Virginia Beach, VA to not only view the properties ourselves but to help support the local investment community and neighborhood revitalization efforts.
Can I Get Money to Pay For Repairs?
We loan money for the purchase, the repair costs, or both. We can include repair costs with the acquisition, as long as the loan-to-value (LTV) of the after-repair value (ARV) does not exceed 65%-70%. If you’re simply looking for repair cost money, we require a minimum loan amount of $25,000. We do require a “Draw Request” form to be filled out to identify the completed repairs to the property, along with copies of the invoices from the contractors. After work is inspected, draws can be dispersed. Typically, repair work is not paid in advanced.
How Long of Period is the Loan?
We will typically write the notes for 6 - 12 months. Longer term notes are available but can lead to increased costs or interest rate.
Private money is not appropriate in some circumstances:
When you need money “long term.” Most private money deals are for no more than 6 - 12 months;
When the deal is “tight.” Don’t look for private money loans higher than 65-70% of the conservative property value, if that. Geneva Lakes Funding and our investors aren’t interested in losing money, and the only way to insure that is to lend based upon very conservative loan-to-value ratios; Oddball properties: Not many private money lenders are looking to get involved in farm operations, mobile homes, or geo-desic domes. Don’t ask: Principal residences. Geneva Lakes Funding, LLC is not properly licensed to provide loans to owner-occupants. We only lend on commercial or investment properties.
On What Type of Properties Do You fund?
Currently we lend on residential investment properties and “light” commercial, such as 1-4 unit properties, smaller apartment buildings, small retail shops or office buildings, small bars or restaurants where there is real estate, single family homes, and strip shopping centers. We have relationships with other commercial lenders that handle larger projects, so feel free to contact us and we can refer you.
Maybe. Private money loans can close quickly, so depending on how soon your upcoming foreclosure is, we may be able to close a loan beforehand. If not, there still may be many options available to you to stop the foreclosure proceeding. If you contact us, we will try to help you find a solution. And remember to always review all your options with a real estate attorney or consultant experienced in these matters.
Why Shouldn’t I Just Use My Home Equity Credit Line?
You can, and certainly the interest rate is bound to be much lower than a private money loan. Just remember that the more credit you take out on existing credit lines, like the ones you may have on several of your rental properties, the lower your credit score will go, as potential creditors don’t like to see you “maxing out” your open credit. It is a sign of potential distress. Most private money lenders are private companies or individuals and do not report to the credit bureaus, so your credit scores are better protected.
What Are The Loan Terms?
Every private money deal has different lending criteria and different point structures and interest rates. As a general rule, count on an interest rate anywhere from 12-13%, and you will probably have to pay anywhere from 2-4 points. Sometimes we will require points to be paid up-front, while other times we can build them into the loan amount. We have come to find that each private money deal is unique and it is impossible to provide exact numbers and loan structure until the deal is reviewed and approved, although all loan terms are always disclosed up-front and long before settlement.
Sometimes yes, sometimes no. It varies from deal to deal. Because much of the money used for private money loans comes from capital investors who want to keep their money “working,” we often require minimum guaranteed interest returns. Once your deal is reviewed, part of the approval process will be advising you of any such guaranteed interest period.
Can I Get Cash-Out to Pay Tax Liens, Judgments or Other Debt?
Judgments and liens that appear on your title must be paid off at closing but, after payment of these items, you may use any additional equity in your property to get cash at closing up to the “loan-to-value” limits.
For instance, if you have a property valued at $100,000.00, and owe $30,000.00 in tax liens, and we approve a loan for 60% of the value of your property, then you will be able to take an additional $30,000.00 at closing for your own use, less any applicable closing costs and lender fees.
Do You Check the Title? Are There Title Fees?
Yes. As with a conventional loan, we will require you to pay for a title search of the property to make certain that you have proper title to the property and the lender is being put in proper first lien position. You will also have to pay for the title/escrow company to close your loan, record a mortgage or deed of trust in the land records, and issue lender’s title insurance to protect the lender’s interest in the property.
Is There a Limit To The Number of Properties I Can Buy?
No. Each deal stands on its own. If it makes good loan sense, you will get the loan regardless of how many properties you own.
Do I Have To Put My Own Money In The Deal?
Usually. We will generally lend you up to 65% of the property value and, unlike a conventional lender, will not reduce the loan amount just because the purchase price is much lower than the property value. Thus, if you buy right, you may be able to get a loan for 100% of the purchase price, although most times we require you to at least pay closing costs.
For example, if you find a property worth $100,000.00 and get the sellers to unload it for $60,000.00, we may well give you the full $60,000.00 purchase price.
On the other hand, if you are buying a rehab property that is worth only what you are paying for it until such time that it can be repaired, we will most likely will do one of two things: 1) give you only up to 65% of the purchase price (which means you must find the other 35%); or 2) give you the full purchase price and require you to establish a construction escrow to insure you make the repairs to increase the value to an amount substantially higher than the original purchase price.
Do I Need An Appraisal?
Yes. We determine value in several different ways: 1) appraisal from a licensed appraisal; 2) appraisal from real estate broker (Broker Price Opinion); and/or 3) internal appraisal by our underwriting team. You will be charged up-front for our valuation of the property and we will obtain the type of appraisal that best allows us to determine value. These fees are non-refundable.
This will depend on your “exit strategy.” For instance, if you have found a great deal on a property from a distressed seller, and you intend to merely “flip” the property and all you need is short-term capital to carry you until you re-sell the property, credit scores are not that relevant. If, however, you intend to rehab the property and carry it as a rental, then you will be need to refinance out of the private money loan. In such a case, we will take a close look at your credit to determine why your scores are low and will make sure you have the ability to refinance the loan before risking capital in the deal.
Do I Need to Provide Personal income Statements?
Maybe. Every deal is different. Once your deal is preliminary reviewed, you will be told by the underwriter which documents you will need to provide.
Geneva Lakes Funding, LLC is not a licensed “mortgage lender” and does not lend money on primary/principal residences. We are a commercial/investment lender. All our loans are either funded by us or by one of our private capital sources. We also broker private money loans to other lenders within our network for a fee.
Are the Loans Fully Amortizing?
No. Most or our private money deals require interest-only payments that usually “balloon” in 6-18 months, meaning the entire principal must be paid back at that time.
Can I Roll Closing Costs Into The Loan?
Sometimes we will allow you to roll points into the loan. However, most other title and lender fees, or other closing costs, will have to be paid by you at closing.