Why Private Money Is Important In Real Estate Investing

The current economic meltdown has resulted to tighter lending regulations and less money for real estate investing. The present difficulty in obtaining loans from the mortgage and hard money lenders has forced real estate investors to turn to private money sources for financing real estate transactions.

Private money is mortgage from private individuals with money to invest for higher profits than traditional investments. The security for private money investment is normally provided by the property itself, not by the borrower.

Why opt for private money for real estate investing business?

1) Less credit limitations
The borrower’s credit is not considered in private money lending since the loan is secured by the property itself.

2) Faster to get
Banks and hard money lenders impose more restrictions than private money lending in granting real estate investing financing. Private money loans are easy to secure, with the under-writer being the lender.

Consequently, you can have your money in a few days. If the real estate deal looks profitable to the lender, it’s funded. Private money funding is oftentimes obtained for deals that will generate income enough for even just the interest payments but is collateralized by real estate property worth substantially more than the loan amount.

3) Much cheaper
It is more expensive to have a partner than finance your deals with private money. Real estate partnerships normally share half-and-half of profits, but most private money providers may charge only 8%-15%half Unlike hard money, private money lenders charge no origination fees or points.

4) Few formalities
Most creative deals are not normally financed by traditional loan sources and even hard money lenders. Many real estate investors get stuck here. Private money can be used to finance real estate investing deals that involve taking over payments.

So how do you entice private money lenders to lend you their cash?
Firstly, understand that you must win the trust of your lender before they can lend you money So a real estate investing website for inviting private money is crucial for your real estate business.

Your website must be simple yet able to unequivocally persuade the private money investors that your real estate investing business is the right place to invest their money, the website must be interactive and allow potential private money lenders to enroll

So a viability plan and a list of successful deals will most likely convince private money investors. Potential private money lenders will naturally seek to see the record of all deals you have done.

If you have no previous record, you must have a detailed plan for each deal including repair estimates, market value, profit potential and all numbers. Funding is likely if all relevant information for each deal is made very clear.

Finally, you will achieve more success in your real estate investing business with more private money readily available any time you need it.

Author:  Simon Macharia


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