The Advantages of Obtaining Private Money
Due to the growing number of lenders of private money, it is much easier for real estate investors to buy investment properties without asking banks for financial assistance.
Thanks to private lending, many investors were able to grab great deals that come their way because they know that they can always rely on private lenders for help.
Private money is a type of creative financing that is usually provided by private individuals who have access to a huge amount of ready money.
Unlike traditional financing, terms may vary from one lender to another and they usually depend on the agreement between a borrower and the financier.
Borrowing money from private money lenders is relatively easier compared to banks and other institutional lenders such as mortgage companies and credit unions.
Because a borrower only needs the approval of a single person, he doesn't have to deal with a negotiating panel that will only reject his loan application after a long waiting period.
In addition, he doesn't have to present lengthy documents and other credentials because these private financiers are not interested with such things.
Because of such a scenario, real estate investors with poor credit scores can still borrow money from these lenders.
All they have to do to convince these people to finance their projects is to prove that the property, which is being offered as collateral, is worth more than the loan amount.
Therefore, if an investor wants to borrow $50,000 from a private lender, he has to make sure that the collateralize property's market value will hit the $60,000-mark once it has been repaired and renovated.
One reason why many real estate investors prefer securing private money over looking for a business partner who will finance a project is that they can earn bigger profits.
Most private lenders ask for interest rates of 8% to 10% while business partners are likely to demand a portion of the profit you will make when you sell a property.
Meanwhile, private lending is usually subjected to federal and state usury laws.
However, there are times that private lenders are not required to undergo routine regulation, which includes taking banking exams.
Thanks to private lending, many investors were able to grab great deals that come their way because they know that they can always rely on private lenders for help.
Private money is a type of creative financing that is usually provided by private individuals who have access to a huge amount of ready money.
Unlike traditional financing, terms may vary from one lender to another and they usually depend on the agreement between a borrower and the financier.
Borrowing money from private money lenders is relatively easier compared to banks and other institutional lenders such as mortgage companies and credit unions.
Because a borrower only needs the approval of a single person, he doesn't have to deal with a negotiating panel that will only reject his loan application after a long waiting period.
In addition, he doesn't have to present lengthy documents and other credentials because these private financiers are not interested with such things.
Because of such a scenario, real estate investors with poor credit scores can still borrow money from these lenders.
All they have to do to convince these people to finance their projects is to prove that the property, which is being offered as collateral, is worth more than the loan amount.
Therefore, if an investor wants to borrow $50,000 from a private lender, he has to make sure that the collateralize property's market value will hit the $60,000-mark once it has been repaired and renovated.
One reason why many real estate investors prefer securing private money over looking for a business partner who will finance a project is that they can earn bigger profits.
Most private lenders ask for interest rates of 8% to 10% while business partners are likely to demand a portion of the profit you will make when you sell a property.
Meanwhile, private lending is usually subjected to federal and state usury laws.
However, there are times that private lenders are not required to undergo routine regulation, which includes taking banking exams.
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