#1 Reason Private Money Is A Real Estate Investor Must
To be a successful real estate investor, you must have access to private money
. Private money is the only source of funding that you, the aspiring real estate investor can use where you set the terms and not your lender. The importance of that in both the short and long run can not be overstated. If you've been a real estate investor using private money for any period of time, or if you've struggled trying to get banks or hard money lenders to fund your deals you know exactly what I mean.
When you make the rules and help your private money lenders be successful, you are creating a long lasting relationship that helps your business profit and your private money lenders increase the returns on their money while being secured by real estate. Think about that for a minute.
If you go to a bank, a traditional source of real estate loans, you play by their rules. They set the terms, the interest rate, the payoff timeline and everything else. And, just to get the money, you have to jump through a lot of hoops. It can be a painful process.
And frankly, it is not something that I would recommend you even try. I want you to start thinking private money. But, you'll pay big if you use hard money. The reason most real estate investors rely on bank loans or hard money is simple. It is a lack of education.
Let's explore the various funding options you can use in your real estate investing business. Traditional loans are the cheapest, have the longest repayment terms but are by far the most difficult for a real estate investor to get. Banks with real estate investor loans base their lending decision on your income and your credit. That might be a problem if you are just starting out or have too many loans already. The bank makes the rules, not you.
I don't recommend using bank loans to try and build your real estate investing business. Now, hard money lenders are more expensive than traditional lenders and their loans are still harder to get than private money. Hard money lenders usually charge several thousand dollars just to fund your deal and then they may charge you up to 18 percent interest. In most cases, you have to pay the interest monthly which can be hard on your cash flow. The bottom line is that hard money lenders make the rules, not you.
Now, let's take a look at private money. I have no doubt that after exploring private money for just a minute you will see how beneficial it can be for your business. Private money is the only funding source that any successful real estate investor needs. Private money can be used to wholesale real estate, for fix and flip deals and can even be structured for long term buy and hold real estate.
Private money can be more expensive than traditional loans but is often times cheaper than hard money. And, private money has much better terms than both. Private money is money that real estate investors borrow from people that do not make their daily living by lending money and yet are interested in getting a higher return on their money secured by real estate.
When you use private money, you, the real estate investor make the rules. After all, it is you that is structuring the deal and part of that is structuring the terms for the money. If you listen to what your private money lenders want, you will always have access to the private money cash to close your deals quickly.
Private money helps you eliminate negative cash flow, it requires no cash or credit to get the loan and can even pay you up front to close on your deal putting thousands of dollars in your pocket right away. The benefits of private money are endless and every real estate investor must learn how to find pirvate money. You should start today.
by: Rob Swanson
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