If you are tired of hearing no from banks in today’s tight money markets, then it makes sense to use a private money lender. A private lender does not have to follow the same government rules and regulations that are imposed upon banks and other traditional lending institutions. Private lenders can choose who they want to invest with. All you have to do is convince your private lender why they should invest in your particular property, and let them decide on their own.This means less red tape, faster closings and more “common sense” underwriting terms.

Benefits of private money!

Benefits of Private Money Loans If your lender decides to lend you the money, then the two of you can work out the mutually beneficial terms and financing arrangements.   One of the benefits of having your private money lender lined up is you never lose a great deal.

You can now focus on rehabbing the property and selling it instead of how you are going to pay for it.

Bank loans are more one-sided because banks have to abide by strict rules and regulations. Private lenders are free to do what they want. You can negotiate more and save money than if you were to go with a traditional bank.

Also, since private money loans are equity-based instead of credit and asset -based, you do not have to meet the same lending criteria, income to debt ratios and credit worthiness that a conventional lender requires.

Many times the total interest and points for a portion of or the entire loan term are “rolled” into the loan amount and paid in advance at closing.

This is great for investors because this means that you as the borrower will not have to worry about making a monthly mortgage payment to your private money lender for most, if not all of the loan term.

Private money purchases can be closed faster and some in as little as 5 business days and financing is available for almost all types of property.  Private money lenders will finance everything from land, to single family rehab properties, to large commercial properties such as hotel and condo developments.

Building a network

How to Build a Network of Private Money Lenders Never lose a good investment because you did not have financing. Start your network of private money lenders by making a list of potential private lenders for your real estate deals.

Talk to friends, associates and other investors.  Get the word out that you are looking for financing, and you have some great investment deals.

Private Lender Guidelines

Private Money Lender Guidelines: You should be aware of some of the following private money lender guidelines though:   The total loan amount of the loan should be no greater than 75% of the current, as-is value of the home (loan-to-value ratio or “LTV”).

The borrower should invest at least 5% to 10% of their own cash because private lender like to see that the borrower has a vested interest in the property.

The lender must always be in first position on the property, meaning the lender must be the primary first mortgage on the property.

Writter by Mike Lautensack

This post was written by

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