Acclaimed poet Emily Dickinson once said, “My friends are my estate.” While that’s true for life in general, it could be interpreted literally when it comes to real estate investing. If you need real estate, you need friends. And your friends in this business are private money lenders.
These are basically people who are willing to lend money. Their cash is classified “private” because it does not come from traditional lending institution like banks. It is from their own money. If you have rich relatives who want to use their savings to profit, you can borrow money from them. Maybe your neighbor has ready money and he does not know where to invest it in.
You might have heard of hard money lenders. They are a good source of private money. In fact, a lot of investors prefer using this kid of financing over traditional “soft” loans offered by banks and other conventional lenders.
One thing investors like about them is they process loans much faster. If you apply for a loan from traditional lenders, you have to wait for at least 30 days. If your application is turned down, then that’s a wasted month. On the other hand, hard money lenders need only a few days to approve or reject applications. If you have good relations with the lender, you can even get your money in just two days. In the event that your application is turned down, you can immediately search for another source of funding. This is speed of processing is crucial when you are in real estate, where the competition is tough. Another investor could buy the property you want to acquire if you don’t secure the funding immediately.
Private money lenders know that real estate investors need the money fast that’s why they release loans as soon as possible. Traditional lenders also understand this situation although they cannot release cash fast because they handle more clients. They also take more time scrutinizing borrowers. They check a borrower’s current income, credit score, and other pertinent documents to see if that person has the capability to repay the loan.
Hard money lenders also assess borrowers although in an entirely different way. They use the property in question as collateral. So if the property is good, you’ll get the loan. Real estate investors, knowing the huge profit that awaits them in each project, are confident they will be able to repay the loan. Successful investors say they always have. Want to know more about private money and real estate investing?