Private Money Lending – Great for Real Estate Investors
Hard money lending and most traditional mortgage lenders have really started to crunch down on approval rates, especially for those who are investors and who open several lines of credit each year to fund their business endeavors. The private money lending process is quickly becoming one of the fastest and easiest ways for investors and private buyers to procure the funds needed for real estate and property purchases. Where foreclosures, auctions, REO’s, and bank owned property opportunities are concerned, the more quickly and effectively you are able to place a bid and pay for the property, the higher you success rate overall.
Private money lending practices are normally carried out by individuals who wish to invest their money in a way that requires very little labor, attention, or time to see a decent return. Settling between the 8% and the 15% mark most commonly, interest rates on private funds borrowed are reasonable and convenient. Many private lenders will require a credit check and a list of other criteria, but for the most part, because the money is actually secured through the property and not through the borrower, a detailed and sensible business plan will suffice for the deliberation of the loan.
Individuals seeking private money lending sources may not have as easy a time gaining a loan, as the investor usually depends on the fast turnaround of a property in order to get out from beneath the debt. With the proper negotiation, however, and by setting up a long term plan for the repayment of the moneys, the residential buyer can also benefit from the services of a private lender. Also, there may be stipulations put into place for those with bad credit. For instance, a private lender may agree to report your favorable payment history to the credit bureaus for a said number of years, at which time your improved credit score might allow you to take on a traditional mortgage and relieve the private lender.
The most important aspect of this type of financing is the convenience that it affords to both the borrower and the lender. The two to six week process of endless paper work, waiting, working to dissolve past credit blunders, waiting, and renegotiating, only to wait some more are not an issue with the private money lending process. You have only one person to deal with, only one person to either approve or disprove your request, and only a short waiting period between query and answer.
A few other aspects of this process might include an inspection by the private lender, which may go so far as to provide an estimate of what the property will be worth once certain agreed upon improvements have been made and appreciation sets in. these are all positive things and should be embraced by you, because knowing that you have a legitimate goal to reach can be a real inspiration to a new homeowner. Private lenders need to see that there are potential dollars available to them before deciding to fork over their investment money, so show them that you and the property in question have what it takes.
