With today’s very difficult lending environment it is very hard for most real estate investors to find a good consistent source of investment property loan money for real estate deals. This is where private lending comes in and offers many advantages over both of these traditional sources of money. If you want to be successful real estate investors you may need to consider private lending.
Banks Are Slow: Some deals don’t work with traditional bank financing what is p2p or hard money loans. If you have to close quickly to get that great deal banks and hard money lenders will require lengthy reviews and lots of paperwork. The seller may be desperate and need their money right away, but you cannot close quick as you wait for the bank to approve your loan. Seller may accept someone else’s offer even if at a lower price just to get their money fast.
Cash Flow: You won’t survive the cash flow game if you use your own money. Between acquisition costs, marketing, holding costs, repairs and selling expenses, you may exhaust your personal funds after your first deal. Having ainvestment property loan lined up increases your ability to make all-cash low ball offers.
Quick Cash: Many sellers will need cash now to solve their personal problems and will need a quick “all offer”. Without access to quick cash you cannot make an offer and will lose another profitable deal to your competitors
Exit Strategies: With access to private money you will have numerous exit strategies available as you buy and hold or buy and quick flip. Private lenders may want you to hold so their money works long term or may want you to flip so they get their money back quick with a profit will be quicker and more profitable
Negotiation Power: Having a group of private lenders gives you the power to make “all cash” and use that power to get lower prices or better terms. Your competitions will not have that power if they only use banks. You can also negotiate flexible terms with your investment property loan. Private lenders are more flexible with payment terms, making it a win-win for both parties.
Low Cost: Private lending is vernally much cheaper money than hard money lenders. Hard money lenders will generally charge 20% to 25% all in cast versus private money at 10% to 15%.
Do Not Splits Profits: You do not have to share or split the profits with partners or hard money lenders. Paying 10% to 15% interest on borrowed funds is a lot cheaper than splitting 50% of your profit.
No Loan Limits: Fannie and Freddie have limits the number of loans you can take out to buy investment property. The limits were recently increased to 10 from 4 but it is still limit you not have with private lenders.
NO Personal Guarantee: Banks and hard money lenders ALWAYS require you to personally guarantee each and every loan. Private lenders will not require you to personally guarantee and look to the property as their collateral
Do Need a Credit Score: Banks and hard money lenders require minimum credit scores. The minimum scores is now somewhere in the 650 to 700. If you do have this kind of score you are out of luck. Private lenders will never look at your credit score as they based their investment decision on the property and renal rates.