Investors – Gain Leverage By Utilizing Private Lenders!!!


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Following the housing market bust, a lot has changed in the business of real estate investing.  The market has flipped around from a seller’s to a buyer’s market, and lending institutions have tightened credit regulations so much that small investors are having a pretty tough time getting the money they need.  Changing the rules of the market place doesn’t mean that business grinds to a standstill.  Changing the rules merely changes the way the game is played.  Investors still need other people’s money to gain leverage and have been devising new ways to achieve this.  One place they are increasingly turning to for funding is private lenders.

Private lenders have always been around, they just didn’t get much press in the past. Now, they are increasingly becoming the go to guys for real estate investors.  Private lenders could be individuals or businesses but they both share some common features.  They typically have fairly loose lending standards as compared to traditional lenders like banks and credit unions.  The catch is, their interest rates are many times higher.

The process of borrowing from private lenders for the purpose of buying real estate works a little differently than traditional borrowing.  Since the risks they accrue are rather high, they expect to have a stake in the investment property.  They typically only fund a purchase if the purchase price is well below the market value, leaving room for a substantial amount of income earning potential.  The investor’s job is to find a piece of property that sells at a reasonable discount.  The private lender then funds the purchase, in the form of an interest only loan.  An escrow company, a title company or an attorney, handles the entire transaction.  They issue the lender a title insurance policy and hazard insurance policy.  The property is designated as collateral for the loan.  When the investor sells the property, they pay off the lender’s principal and keep the rest of the money as their profit.

Getting funding through a private lender can be a quick and hassle free way for an investor to gain leverage and enjoy huge profits in a potentially lucrative investment.  To ensure maximum returns, the investor must buy at the lowest possible rates and keep rehab costs to a minimum.  They also need to find a buyer as quickly as possible to minimize the interest payable to the lender. Since the art of private lending circumvents a lot of the rules and regulations that traditional lending adheres to, investors need to take very careful steps to protect themselves from unscrupulous lenders.  They should make it a habit of reading fine prints in their entirety.  Hiring an attorney is the wisest approach to take in protecting themselves against the potential threats that loom over this relatively new and untested way of doing business.

Asking questions with these few tips in mind will help save real estate investors thousands. For more ideas related to real estate investing, call or visit us a Homevestorsfranchise.com. We are the nation’s number one home buying franchise with over 15 years of experience. Our company has a vast assortment of real estate investment and real estate franchise opportunities available to help you grow your real estate business. Come see us for more information.

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