Private Money Lenders Can Be a More Flexible Option for You
In fact, a lot of people can potentially become very successful investors in real estate, but very few people actually try. Most do not try to get rich this way because they think they can't; they don't have the money to invest in properties and they believe they cannot get financing by going to a bank for a loan. However, there is a better and easier way for you to finance your properties if you want to become a real estate investor. You do this through what are called private money lenders.
What Are Private Money Lenders?
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.
Why Are Private Money Loans a Better Way to Finance Properties?
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.
Benefits of Using a Private Money Lender
As a real estate investor, you can approach a private money lender and make your case with them individually. You can explain to the private money lender why you are someone they should invest in, and after you've done so, they can make their own decisions. However, there's more to it than that and the benefits go even further. If the private money lender is interested in what you have to offer, you both can sit down and work out financing and repayment arrangements that are of benefit to both of you. You can both state what you want out of the arrangement and agree on a payment schedule and interest rate that satisfies both of you.
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.
The Downside of 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.
Private Money Loan Benefits Recap
Private Lender can lend freely and does not have to abide by tough rules and restrictions. Allows real estate investors with problematic personal credit histories to secure financing for their properties.
Provides for more open-minded communication between the borrower and private money lender. The borrower can negotiate a flat fee or interest-rate that is certainly a better deal for the borrower than that of 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.
There is no formal application process required. Instead, borrowers can negotiate directly with private money lenders and convince them to work with them in the purchase of the property or properties 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.
All of these benefits make private money loans the most flexible funding option for real estate investors. A private money loan allows you a variety of options and opens the door for many real estate investors who would otherwise be turned down by a traditional lender.
What Are Private Money Lenders?
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.
Why Are Private Money Loans a Better Way to Finance Properties?
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.
Benefits of Using a Private Money Lender
As a real estate investor, you can approach a private money lender and make your case with them individually. You can explain to the private money lender why you are someone they should invest in, and after you've done so, they can make their own decisions. However, there's more to it than that and the benefits go even further. If the private money lender is interested in what you have to offer, you both can sit down and work out financing and repayment arrangements that are of benefit to both of you. You can both state what you want out of the arrangement and agree on a payment schedule and interest rate that satisfies both of you.
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.
The Downside of 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.
Private Money Loan Benefits Recap
Private Lender can lend freely and does not have to abide by tough rules and restrictions. Allows real estate investors with problematic personal credit histories to secure financing for their properties.
Provides for more open-minded communication between the borrower and private money lender. The borrower can negotiate a flat fee or interest-rate that is certainly a better deal for the borrower than that of 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.
There is no formal application process required. Instead, borrowers can negotiate directly with private money lenders and convince them to work with them in the purchase of the property or properties 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.
All of these benefits make private money loans the most flexible funding option for real estate investors. A private money loan allows you a variety of options and opens the door for many real estate investors who would otherwise be turned down 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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