subject: Must-knows About Private Money [print this page] Private money can help you become a successful real estate investor, especially when you are just beginning in your career. But before you engage in transactions with lenders, here are some things you must know about private money.
Also known as hard money, this financing is ideal when it comes to real estate investing. This is primarily because it is easier to access compared to traditional loans. Unlike banks and other traditional lenders, private money lenders take just days to process applications. This is very helpful to real estate investors, especially at a time when competition is stiff. If you get the money fast, youll be able to outfox competition. You close the deal and you cash your paycheck. Lenders in this kind of financing understand the urgency involved in real estate investing, that is why they are ready to give you the funding in the soonest possible time. After all, you are giving them an opportunity to profit. They might as well take it and earn profit fast.
It is also important to note that hard money lenders assess borrowers using a different method. If traditional lenders determine your creditworthiness through your credit score and report, private money lenders assess them based on the deal they are presenting. For example, a real estate investor wants to rehab a property. Lenders will examine the property and your plan for it. If they see that your ARV, or after repair value, is high and will bring you good returns, your are likely to get an approval.
You should also know that private money can fund a whole project, unlike traditional lenders. If you borrow from banks, you will get the money you need to buy a property. But what it you want to rehab it? You will have to look for another source of financing to shoulder repairs costs and other expenses. On the other hand, hard money can cover all your expenses, thanks to the unique way it is computed. Lenders in this kind of financing usually give borrowers between 60%-70% of the ARV, or the value of the property after it was rehabbed. This amount is usually enough to but the property and repair it.
Hard money, however, has higher interest compared to traditional financing. This is because private money lenders are more at risk of defaults. This is their way of ensuring the survival of their business. If you still have queries on hard money, rehabbing, or real estate investing. Simply visit rehab-real-estate.com.
