Real estate investing is one of the most tried-and-true approaches to building generational wealth and a sustainable stream of passive income. With the correct strategy and preparation, investing in real estate has the potential to be an exceptionally profitable endeavor for all individuals regardless of experience.
Real estate investors have an almost overwhelming number of financing options depending on the specific type of property they are planning to buy and their operating budget. Private money lenders, also called ‘hard money’ lenders, can provide a number of key advantages over conventional bank loans and are thus a viable alternative to consider for your next real estate investment project. A private loan can be a proverbial breath of fresh air for real estate investors seeking convenient funding specifically tailored to their unique needs. Essentially, private lending companies are entities unlike the highly regulated conventional lenders such as banks and credit unions that provide flexible financing plans for real estate projects of all types. The lending experts at Express Capital Funding have compiled the following breakdown of private money lending to help you decide if it is the right fit for you.
Speed Matters
Regardless of whether you are a fix-and-flip investor or commercial real estate guru, obtaining a loan from a private money lender as opposed to a personal loan from a traditional financial institution has a number of upsides. First and foremost is efficiency. When it comes to real estate, time is the most precious commodity. Even a relatively minor delay during the bidding process can be the difference between locking in a promising real estate deal and losing out to the competition. Successful investors need to be able to act fast without having to worry about having reliable access to capital when they locate the right investment property. Sellers will typically prefer to see proof of funds before agreeing to close. This can be challenging if you are working through traditional lenders who usually require weeks or even months to underwrite personal loan applications. The good news is that hard money lenders like Express Capital Financing can get you the money you need to lock in deals in a matter of days giving you the peace of mind that funding won’t be an issue when it comes to securing deals.
Less Administrative Hassle
The main culprit behind the sluggish timeline associated with conventional loans is the sheer amount of paperwork these lenders require investors to provide as part of the application process. Private money lenders practice what is called ‘asset-based lending’ meaning they premise their underwriting process mainly on the future value of the underlying property asset as opposed to the borrower’s credit score or financial history. This means less paperwork and more flexibility. Private money lenders like Express Capital Financing know what a great investment deal looks like and are more than willing to work with savvy investors to structure innovative capital solutions to make these transactions happen. That is a service traditional lending simply can’t offer due to the regulatory red tape they have to adhere to.
The Time is Now
Don’t miss out on this distinct opportunity to capitalize on the real estate investment market! Express Capital Financing specializes in delivering efficient and flexible funding solutions in a fraction of the time it takes to secure a traditional loan and with significantly less paperwork and prerequisites. Get the money you need to secure your next deal and lock in a passive income stream that will pay dividends for years to come. Contact us today to learn more about how Express Capital Financing can help you accomplish all of your investment goals!
FAQ
Who should consider private money lending?
Private money lending is an attractive option for borrowers who are looking to finance their real estate investments. Private real estate lenders can provide this type of financing quickly and with fewer requirements than traditional lenders, making them an alternative source of capital for those looking for short-term loans or who have been unable to qualify for conventional bank loans.
Real estate investors, property developers, and homebuyers should all consider a private money loan a viable option.
What do lenders consider before offering a private money loan?
When considering a private real estate loan, it’s important to understand what lenders consider before they offer the loan. Private lenders are often a great source of financing for investors because they provide flexible terms and often have less stringent requirements than traditional bank loans.
The most important factor that private lenders consider prior to loan approval is the borrower’s ability to repay the loan. Lenders will typically require proof of income as well as a general overview of the borrower’s financial standing to determine whether they can handle the loan payments. Additionally, private lenders may consider other factors such as the value of the property itself, any liens or encumbrances on the property, and the borrower’s credit history.
Are private lenders regulated?
The private lending industry is not regulated at the federal level, but some states do have regulations in place to protect borrowers from predatory practices. These regulations typically require lenders to register with the state and adhere to certain terms and conditions. In addition, most states have laws that limit how much interest a private lender can charge on a loan.
Regardless of whether or not private money lending companies are regulated, it is important to always do your due diligence before entering into a loan agreement with any lender. Make sure that they are reputable and have a good track record of servicing clients in the same area as you.
How much do private lenders charge?
Generally speaking, private real estate lenders will charge anywhere from 10% to 20% interest on their private money loans. This varies greatly depending on the lender and the loan terms. Additionally, some lenders may also charge origination fees or other closing costs on top of the interest rate.
What are the risks in private lending?
While hard money lending is a great option for private investors looking to finance their next real estate purchase or project, there are some potential risks when compared with traditional lending institutions.
One of the biggest risks associated with private lending is that it may not be backed by government guarantees or insurance. Private lenders are taking on higher levels of risk, which means they are subject to greater losses if the borrower fails to repay the loan. Additionally, there is no guarantee that the value of the collateral will remain static, which could make it difficult or impossible for a lender to collect on the remaining loan balance if it goes into default.
