If you are a real estate developer and enjoy flipping houses, then you know how hard and time consuming it can be to get constantly financed from lenders. A good relationship with a bank is always a great way to ensure that you will have funds available when you need to purchase property. However, even banks can deny you once in awhile. Many developers turn to private money and private lending to obtain their properties.
The great thing about private money and private lending is that it can be a lot easier to obtain. There is no money down and no credit required. All you are doing is borrowing money from an investor and paying her back with interest. There is less paper work involved compared to dealing with a bank, and there are minimal costs involved such as the closing fees, recording fees and title insurance. Overall the fees are much cheaper with private lending and the approval time is much faster.
Real estate developers have found that it is easier to find and borrow private money. Most cities have investor associations to contact. Additionally, private lenders can go to your church, be a neighbor or be a family member or friend. Deals are typically done per property and the money is paid back upon sale of the property along with the interest. Developers like private deals because they go a lot faster with an approval time of about 48 hours and funding within 10 days.
There are more benefits to private money and private lending that make it worth it rather than going through a bank. The fast turn-around time and the lesser amount of paperwork make it very attractive. The funds are wired directly into the developer’s account and are available immediately to purchase a property. Once a real estate developer has developed a great relationship with a private lender, then it makes it all that much easier to borrow money for other investment projects down the road. As long as the private lender is getting her money back with the agreed interest, then getting another private loan should not be an issue.
If you are a real estate developer or are just getting into flipping houses, then you should think about private money from a private lender. Think about whom you know and what kind of connections you may have. Many individuals have pulled money out of their IRAs to invest in properties. It may seem almost impossible, but with a little research and asking around you just may find the right person who is willing to loan you the money. In the end if everything works out, you now have a solid private lender and may never have to go to the bank to get a loan.