One of the most important resources any real estate investor needs in their business is the cash to fund their deals. But where is this cash going to come from? You certainly don’t want to go to a bank for it. You’ll have to fill out a lot of paperwork and wait weeks to find out if you’re approved. The biggest problem with this method is that while you are waiting to be approved, someone else who can close more quickly suing private funds will get the deal you were looking at. So where should you get the money to fund your deals?
The answer to this question is simple; private lenders. So what is a private lender and how are you going to find these folks to fund your deals? Private lenders are ordinary people, they are all around you. You just have to find them. A private lender is anyone who will loan you money to fund your deals. There is no credit check involved and generally no fees. Their investment is guaranteed by a mortgage on the property you are purchasing plus the insurance on the property. Generally the loan to value on these mortgages is about 65-75%.
It is fairly easy to find private lenders. The first thing you need to do is to look around you. Do you have relatives, friends or professionals that you know who have money lying around in CDs or money markets that are not getting a good interest rate, or maybe you know someone who just inherited some money and they need to invest it. Since you are going to pay them anywhere from seven to twelve percent interest on their money, they will be very interested in talking to you about loaning you the money you need. And once again, their investment is guaranteed by a mortgage on the property and by the insurance you keep on the property.
A lot of people who would be interested in becoming private lenders and earning a higher interest rate on their hard earned money don’t even know the opportunity exists until you tell them about it. Other ways to locate private lenders would be through your local real estate clubs, Realtors, or mortgage brokers. These folks usually work with or know of private lenders who are looking to fund deals.
There are many advantages to using private lenders in your business. The main advantage is the ability to be in total control of your deals. Your money will be available to you almost immediately and at the terms you agree on with your lender. There is no pre-payment penalty, no points like on a regular mortgage, no down-payment, and reduced closing costs. The money is available to you when you need it, and most lenders will let you make part or all of the interest payments at the end of the loan. This increases your cash flow on a monthly basis. In addition, they will supply you with the funds needed for repairs on the property.
What this does for you is to greatly increase the number of deals you can do, the types of deals you can do, and gives you the ability to close very quickly. In the real estate business time is of the essence. Just the ability to close quickly can make or break a deal for you. The ability to close quickly will give you a huge advantage over most of your competitors. Plus, if you have the ability to pay cash and close quickly, many times you will get a much better deal on a property you want to purchase. With private lenders in line, you are always equipped with all the funds you need to grab each opportunity as it arises. The sense of confidence this will give you in doing your business is nothing less than amazing.
Discovering this key ingredient in your real estate business will allow you to do more deals and make more money than you ever imagined.
For more information about Kathy Kennebrook’s real estate products go to marketingmagiclady.com