What is Private Lending?

Summary

Shad Long, Chief Investment Officer with Verdeo Capital, a Sacramento area private money lender answers the question “What is Private Lending?”

  1. What is a Private Money Loan?
  2. Who qualifies for a private money loan?
  3. What if I have negative credit or credit blemishes?
  4. What is an Exit Strategy?

Unlike conventional institutions, Private money comes from individual investors who invest in real property. Borrowers who find themselves with negative credit situations, credit blemishes or multiple properties are considered because every situation is unique. More importantly than getting into the loan is ensuring a solid Exit Strategy or how to pay off the loan when it’s time. Shad goes into detail about what this looks like.

If you would like to talk to someone about obtaining a Private Mortgage…
Call Verdeo Capital today at (916) 580-1240 to review your unique situation.


What is Private Lending?

Most Common Scenarios

Qualification Process

Borrowing Process


00:02 Gregory Glacken: Well, thanks and welcome. I’m here with Shad Long today, Chief Investment Officer of Verdeo Capital Group. And we’re talking about the basics of private money. And so, Shad, why don’t you just jump right in here, you wanna tell us basically what is a private money loan and then who is it for?

00:20 Shad Long: Sure, yeah. It’s probably one of the more common questions we get is just what is it, a private money loan and how it can help me? A private money loan and more specific to Verdeo Capital Group is quite simply, it’s a mortgage loan where the funds that are utilized come from private individuals or private parties in contrast to what you would find at a more conventional or traditional type loan where the funds are coming from a bank or large financial institution. Funds that are utilized for private lending, again they come from someone’s… An individual’s IRA, pension plan or just taxable savings. As investors we all have many choices as to where we can put our funds to grow for us and generate revenue and that type of thing. We can buy stocks, we can buy bonds, mutual funds, gold, annuities, CDs, you name it, the list goes on. One of those options are mortgage notes. These folks can place funds with us and they entrust us to make appropriate and wise decisions just to where to put their funds out on these types of notes.

01:33 Gregory Glacken: Okay. So, what I’m hearing here is… There are actually two aspects to this process. There’s an individual who has money who is interested in investing, and that would person A. And then there is another person over here that’s interested in borrowing their money for particular project, that’d be person B. And you facilitate the transaction.

01:49 Shad Long: Correct.

01:49 Gregory Glacken: Okay.

01:50 Shad Long: Yeah, yeah. And we go into greater detail on the investment side, with investor side on our website, where you’re free to visit that and get more information about that as well.

02:00 Gregory Glacken: Okay. Well let’s focus on the borrower right now because that’s kind of what I’m curious about. Now, these individuals who are looking for money, we know that they are individuals, we know who it’s for, and what have you, but how do they qualify? This is very different from commercial lending, I’m sure, as far as a banking institution or conventional lending. We’re talking about individuals and essentially they’re in that state, so how does this process work?

02:24 Shad Long: Yeah, it’s somewhat similar but some of the guidelines that we adhere to and use for underwriting are a bit different. Folks that may come to us from a private lending perspective, they may have some challenges either obtaining private money or… Excuse me, or a conventional financing, or they just don’t have the time. I mean just to give you a couple of examples, you may ask someone who’s in contract to purchase a property now and they have a very short window to close. They don’t have the 45 to 60 days or even 30 to 45 days to close conventionally, they might only have 14 days.

03:04 Gregory Glacken: I see.

03:04 Shad Long: So, they don’t have the time to kind of battle through all the red tape of conventional financing. Another would be someone who has maybe some challenges on their credit.

03:14 Gregory Glacken: Oh, thank you, that’s my next question. Go ahead.

03:16 Shad Long: Yeah, yeah. Someone who maybe has a short sale or foreclosure on their credit or a bankruptcy, these folks are on the shelf for a particular clip of time before they are bankable institutionally speaking again. Or they might be buying a property that the property itself is not finance-able. We’ve touched on this on a previous video where a previous owner, maybe they’re buying a bank-owned property and the previous owner ripped out the kitchen or took the bathroom with them or took the air-conditioning unit, that type of thing. Well, really kinda have two options to purchase a property like that. One is all cash or two is private financing.

04:00 Gregory Glacken: Okay, alright. So sounds like a private money is for an individual that may not otherwise qualify for the conventional route and it also sounds like bankruptcy, foreclosure, short sale or maybe a blemish on a credit report isn’t a disqualifier like it would be in the traditional world.

04:14 Shad Long: It’s not. One of the key items that we focused on when we underwrite our files is an exit strategy.

04:23 Gregory Glacken: Okay.

04:25 Shad Long: Exit strategy is very important. Private financing and private money loans are… They’re never meant to be a long term financing solution for anybody. The cost is slightly higher than you would see conventionally speaking. So, this is not meant to be a 10 or 20, or 30-year loan. This is meant to bridge a borrower from and get… And help get them from point A to point B in a short and immediate period of time.

04:51 Gregory Glacken: Okay.

04:52 Shad Long: 1, 2, 3 even up to 5 years is really kind of the timeframe for our notes.

04:59 Gregory Glacken: Okay. So it’s more of a short term arrangement so that an individual can get into and out of a deal very quickly without the red tape of larger institution.

05:09 Shad Long: Right.

05:10 Gregory Glacken: Okay.

05:10 Shad Long: Right.

05:10 Gregory Glacken: Very good, sounds good. Thanks so much for watching. This has been Shad Long here, Chief Investment Officer with the Verdeo Capital Group. And thanks again. If you’d like to get in touch with the team here at Verdeo Capital, you can give us a call at 916-580-1240 or we’re on the web at www.verdeocapital.com.