Working with a Private Money Lender: The Benefits

If you’re interested in buying a residential investment property, you know it’s not that simple. There are so many steps, and so many things that could go wrong. It’s a huge process, but one of the most difficult aspects is finding funding for the property. Of course, you could go to your local bank and try to borrow some money, but there’s a list of potential problems with that. You could maybe ask friends for money, but that’s awkward, and maybe even less likely to work than the public bank. Maybe it’s time to consider borrowing money through a private money-lender. You might be surprised by how many of your problems they can solve. Here are a few things that a private money-lender may be able to help you with.

Less red tape

No matter where you find money, whether it’s a public bank or your neighbor, there will be some kind of legal restrictions and requirements. However, the amount of paperwork that needs to be worked though, and the number of requirements that must be met, differ greatly. A private lender has fewer sanctions from the government than a public bank. This means that you won’t have to put up with as many restrictions and rules. They also tend to be much smaller, which means, instead of refusing your loan simply because their formula or their computer says they’re supposed to, like the larger banks with corporate offices, they can bend the rules a little, in the right situation.

More flexible terms

Private lenders can be more flexible in a number of ways. In addition to being able to grant a loan, even though it may not quite fit the formula on paper, they also have the power to bend the terms to fit your needs. Maybe you don’t have very much cash and can’t afford a large down payment. A public bank would turn you away immediately, but a private lender would at least consider your offer. Perhaps you have plenty of money to put down, but you don’t want to pay the higher interest rates. A private lender might be able to help with that too. Whatever your situation, even if it doesn’t fit into the bank’s cookie-cutter formula, a private lender may still be able to help you.

More forgiving

Everyone misses a payment at some point. The difference is in how the lenders respond to it. A public bank will start the foreclosure process as soon as possible because their corporate office tells them that they can’t afford any unpaid loans, but a private lender may consider your situation, and if possible, help you out. Maybe it’ll just be another month before you’ll be able to sell the property for a profit and pay off the loan. A private lender is much more likely to understand.

More understanding

A private lender has much more experience in the industry you’re in than any public bank. Many people don’t understand how flipping or repairing for investment works, but the right lender will completely understand because they’ve been working with that, and with other people who have done the same thing as you, for decades. They know that there are sometimes a couple of months between renters, or that repairs are often higher than anticipated. This nature of understanding may be worth more than anything else, when you run into a problem and you need help.

Private lenders are, in fact, very different from public banks in a number of ways. If you are having trouble qualifying with a public lender, or you’d just rather work with someone who understands what you’re doing, contact us. We’re here to help.

Center Street communications are not intended to provide business, legal, tax, investment or insurance advice.  No Center Street communication should be construed as a recommendation for any business or investment strategy by Center Street or any third party.  You are solely responsible for determining whether any investment, investment strategy, business strategy or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. You should consult your legal or tax professional regarding your specific situation.