There are a lot of people out there who could potentially become very successful real estate investors, but most people don't even try. Why? Because they themselves don't have the money to invest in property and they think it would be too difficult to try to secure financing through traditional venues, such as a bank or other type of "hard money" lender. However, what they probably don't know is that there is a better and easier way for real estate investors to finance properties and thus have success. That is, through private money lenders.
Private Money Loans: An Explanation
A private money loan is one that is financed through an individual who has spare money to lend and who wants to make a small profit off of that money. This is the most flexible financing option for real estate investors because you get to borrow money from a regular individual, just like you and me, instead of a bank or other lending institution - which can be very impersonal and formal. Banks and lending institutions have rules and regulations that they must follow when deciding who to lend money to, but private money lenders do not.
Finance Your Properties Through a Private Money Lender: a Better Way
Banks and other traditional lending institutions are bound by strict rules and regulations. They have to follow these regulations exactly. However, private money lenders can choose who they want to lend to, regardless of the investors' credit rating, financial statements, and other financial benchmarks.
The Benefits of a Private Money Loan
As an investor, you can appeal and make your case to a private money lender, explain to them why they should invest in your property, and allow them to come to their own conclusion. But the benefits of a private money loan do not end there. If the lender is interested in your offer, the two of you can then work out a financing and repayment arrangement that benefits both parties. You and the lender can both state your expectations and agree on an interest rate and payment schedule that makes both of you happy.
What's more, since a private money loan is a short-term loan, the lender may even be willing to wait until after you flip the property to receive any repayment at all. This allows you to focus on fixing and selling the property, without the anxiety that can be associated with payments on a property that hasn't brought in any money.
Drawbacks to Traditional Hard Money Loans
While private money loans can be of benefit to both the borrower and lender, bank loans usually only benefit the lender. That's because the banks get to set the standards and are the ones who set the interest-rate and other fees as necessary. You also can't negotiate payment arrangements or other adjustments with them. That means that even if your credit history is perfect, and even if you're pretty sure you can get financing from a traditional lender, going through a private money lender will likely still be of greater benefit to you.
Summarizing the Benefits of Working with a Private Money Lender
The private money lender can lend to whomever he or she wishes to and doesn't have to follow specific rules and restrictions in the same way traditional institutions like banks do. This means that even real estate investors who have less than perfect credit histories may be able to obtain financing needed for their properties.
Opens the lines of communication between lender and borrower. Borrower can negotiate an interest rate or flat fee that is almost guaranteed to save money over a traditional loan.
Both the borrower and private money lender can negotiate payment arrangements that will benefit both of them. The lender may even be willing to forgo payments until the borrower has sold the property.
No financial application is required. Borrower can appeal directly to the private money lender and convince him to take a chance on the property in question.
Unlike institutional bank loans, working with a private money lender will help him see you as an individual with established goals instead of just as a paper application that has to pass specific guidelines.
For all of these reasons and more, private money loans can be the most beneficial and flexible funding option for you as a real estate investor. Using a private money lender lets you have a variety of options and may give a chance to real estate investors who would likely otherwise be turned away by a traditional lender.
Private Money Loans: An Explanation
A private money loan is one that is financed through an individual who has spare money to lend and who wants to make a small profit off of that money. This is the most flexible financing option for real estate investors because you get to borrow money from a regular individual, just like you and me, instead of a bank or other lending institution - which can be very impersonal and formal. Banks and lending institutions have rules and regulations that they must follow when deciding who to lend money to, but private money lenders do not.
Finance Your Properties Through a Private Money Lender: a Better Way
Banks and other traditional lending institutions are bound by strict rules and regulations. They have to follow these regulations exactly. However, private money lenders can choose who they want to lend to, regardless of the investors' credit rating, financial statements, and other financial benchmarks.
The Benefits of a Private Money Loan
As an investor, you can appeal and make your case to a private money lender, explain to them why they should invest in your property, and allow them to come to their own conclusion. But the benefits of a private money loan do not end there. If the lender is interested in your offer, the two of you can then work out a financing and repayment arrangement that benefits both parties. You and the lender can both state your expectations and agree on an interest rate and payment schedule that makes both of you happy.
What's more, since a private money loan is a short-term loan, the lender may even be willing to wait until after you flip the property to receive any repayment at all. This allows you to focus on fixing and selling the property, without the anxiety that can be associated with payments on a property that hasn't brought in any money.
Drawbacks to Traditional Hard Money Loans
While private money loans can be of benefit to both the borrower and lender, bank loans usually only benefit the lender. That's because the banks get to set the standards and are the ones who set the interest-rate and other fees as necessary. You also can't negotiate payment arrangements or other adjustments with them. That means that even if your credit history is perfect, and even if you're pretty sure you can get financing from a traditional lender, going through a private money lender will likely still be of greater benefit to you.
Summarizing the Benefits of Working with a Private Money Lender
The private money lender can lend to whomever he or she wishes to and doesn't have to follow specific rules and restrictions in the same way traditional institutions like banks do. This means that even real estate investors who have less than perfect credit histories may be able to obtain financing needed for their properties.
Opens the lines of communication between lender and borrower. Borrower can negotiate an interest rate or flat fee that is almost guaranteed to save money over a traditional loan.
Both the borrower and private money lender can negotiate payment arrangements that will benefit both of them. The lender may even be willing to forgo payments until the borrower has sold the property.
No financial application is required. Borrower can appeal directly to the private money lender and convince him to take a chance on the property in question.
Unlike institutional bank loans, working with a private money lender will help him see you as an individual with established goals instead of just as a paper application that has to pass specific guidelines.
For all of these reasons and more, private money loans can be the most beneficial and flexible funding option for you as a real estate investor. Using a private money lender lets you have a variety of options and may give a chance to real estate investors who would likely otherwise be turned away by a traditional lender.
About the Author:
Stop worrying about qualifying for loans and take the first step to becoming a successful real estate investor. Learn more about getting funding from Private Money Lenders.
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