Private Money FAQs - KennedyFundingLender.com

What is private money, anyway?

It’s a very misunderstood term. Even many industry professionals are not really conversant with the term.
The following FAQs were designed to help shed some light on this topic.

What is private money used for?
Private money is generally used as a bridge loan, generally a short to medium term solution (1-6 years). It’s used for all types of real estate secured financing: commercial retail, restaurants, hotels/motels, marinas, elder care facilities, industrial, agricultural, raw land, land development, construction, rehab, multi-family and residential development.

What about the interest rates?
They generally range from 10 to 15%. The rate is determined by looking at a combination of factors: (a) LTV ratio, (b) strength of borrower, (c) condition/desirability of property, (d) actual cash-in or real equity contributed by borrower.

Why would anyone pay that kind of money for a loan?
It’s true that private lenders are usually more expensive than traditional sources such as banking institutions. The extra cost, however, is deemed worth it due to the considerable extra service provided. At Kennedy Funding, speed is a significant advantage, of course. Compared to a traditional loan which could take months, our quick response generates savings which mitigate the costs.

What is private money usually used for?
Our most common loans are probably construction, rehab, and land development loans.

How fast can private money loans close?
We can close loans in a matter of one or two days. Usually, however, it’s about 1-2 weeks. (Remember: We can only move quickly if the borrower, broker, and other third parties are also moving quickly. Everyone has to cooperate.)

Is an appraisal necessary?
Sometimes. Evidence of value is a critical part of the private money loan process. However, a good set of comps can be just as effective in establishing value.

How do I get paid?
You bring us a borrower. We price the loan to you. You then price the loan to your client, adding your fees. You stay involved in the loan (or not) as you choose, and prior to closing, you submit a fee demand to escrow. You then receive a check directly from the attorney title company. Simple.

Why do they call it "hard money", by the way?
No one really knows. Some people think it's because the money is used for "hard to do" loans. Others think it’s because the loans are "hard to get" or "hard to pay." Still others believe that it’s called that because traditionally it has been "real money" in the sense that it isn’t borrowed. Institutions loan borrowed money, which can be referred to as "soft money." In the final analysis, there’s no ‘right’ answer.

How do I go about doing a private money loan with Kennedy Funding?
First, run the concept by us. You can call and discuss the loan with us, you can e-mail a summary, or you may use our online loan submission form, which will walk you through the process. If we like the project concept and feel that the loan is viable, we go to Step 2.

If we issue a loan commitment, we perform our due diligence and hire an independent appraiser to inspect the property.

Is the deposit check refundable?
If we close the loan through escrow, the deposit is applied as a credit to the loan fees. If we don't close the loan because (a) you do not or cannot perform or (b) the project upon inspection is "significantly" different than as represented, we keep the deposit to reimburse us for our costs. If Kennedy fails to perform for any reason, we return the deposit directly to you.