One of the best options that you can get for your real estate investment is through private money loans. In case that the least suitable option is not a good fit or if traditional loans are not wise, then this would work just perfectly. As a matter of fact, there are a number of recommendations where you could find the best private money lender similar to mortgage consultant, investment clubs, internet, real estate seminars, family members, lawyers, financial advisors, accountants, CPAs and the likes.
Generally, private money lenders are hedge funds, private individuals, portfolio lenders, agents of REO or bank owned properties, institutional investors or a friend or family member that you might know personally. The usual schematics for private money investors is that, they will be lending you money on short term but with upfront fees and high interest rates. While the points are ranging from 4 to 10, these private investors are actually more focused on the equity of the property than your credit. In the event that you could prove them that there’s good equity and a firm strategy to repay them, you’ll not have a problem in finding private money lenders to help you out.
These days, it actually makes more sense to work with a private money investor now that we are experiencing tight financial market. Besides, why would you opt to lose an investment opportunity just because you can’t acquire it through conventional financing? With a private money or hard money loan, you will be able to get it as short term loan. A lot of investors do prefer this loan because of the reason that they need money fast and because of that, it prevents them from losing profits such as real estate foreclosure auction opportunity, pre-foreclosure and the likes where time is important and having cash fast is vital. And even if buyers/investors qualify for the traditional long term loan or financing, it could take them long enough to get and at the same time, the deal could be lost when you have the traditional loan after 30 to 45 days.
In comparison to commercial transactions, private transactions are not regulated by the federal or state laws. With this being said, private money lenders could decide a lot faster. Every individual money lender may have a different policy that they follow such as verifying references, checking credit or verifying employment. Still at the end of the day, the main focus of private money lenders is to see how fast you could pay them and whether or not there’s enough equity on the property.
A nice tip to follow when you are working with a private money lender is to have a list so by that, you can easily reach out to them when you find a property.