Private Lenders – Understanding Private Lending
If you have tried to secure any type of financing in the past 1-2 years, you may have been amazed at how strict the standards have become. The last time you attempted to get financing, you were probably breezed through the process fairly quickly, everyone was and that was one of the problems our economy faced. Too many unqualified people qualified for credit and financing without the real ability to pay it and they defaulted on their payments. This left many houses and even possessions to the banks who weren’t too happy about acquiring houses, cars, furniture, and all sorts of things.
Due to the fact that so many loans have been defaulted on, the banks and mortgage lenders are less likely to offer financing of any kind. This is especially true for small business owners, entrepreneurs who want to start a new business, and even those who are self-employed. You may have substantial income and can even prove it but they do not want to give you the money. You are unable to invest within your capabilities the way you wanted. Not only is this frustrating but you can feel as though you’ll never reach your financial goals.
Banks and mortgage companies have their reasons for not wanting to lend but this doesn’t help you achieve the financial freedom for which you are longing. There is something wonderful about being able to run your own life and work the deals you want to but without the financing, you can’t and you may feel discouraged or as though your ideas and plans are not worthwhile. This is not the case. You are entitled to achieve your goals and work the deals you want to without being made to feel stupid or undeserving of funding.
Real estate is a fickle business and there are many times when what might be a sound investment one year is not the next. By keeping your expenses down, you can almost always come out even or make a profit. Of course a profit is always desirable but in the cases where the market makes that impossible, you can at least guarantee money back. After all, a wise investor knows how to make this happen. Banks and mortgage companies are wary of giving money to any sort of real estate business because of this uncertainty. When the demand goes down, houses sit vacant and you may not be able to pay the mortgage notes. If you don’t default, the bank will be happy with you, but if you do, you’ll face a whole mess of legality.
Banks and mortgage companies make it next to impossible to get funding for a project, even if you have experience and credentials. Don’t let an institution dictate your future and your ability to succeed. There are other options that will be beneficial to you and to others.
Have you ever thought about searching for private lenders? These are basically lenders who have the money to lend and want to make good investments. Most of them have chosen a market in which to invest such as stocks, real estate, new business start-ups, or various other options. If you can find private lending options in real estate, you will be able to do more deals with less overhead and hassle.
The most important part of a successful real estate business is creating and maintaining relationships. When you know people, add them to your network. Don’t always add them as just “clients” though. Add them as “friends”. It is a great idea to make lists and email categories for those you want to just be friendly with and those with whom you may want to work with, such as contractors. Your personal network is your greatest asset as a real estate professional and especially when you begin to look for private lending.
There are several steps you can take when acquiring private funding:
1. Create a thorough business plan
2. Make a biography of your success in every area that you’ve worked
3. Establish a reference base of people who will gladly speak highly of your integrity and work ethic
4. Spread the word
5. Network with other agents and successful investors to glean their wisdom
Private funding will open up a whole new world to you. These are people with liquid assets who want to put their money somewhere successful. You are not going to have to convince them real estate is a good idea but you will have to convince them that YOU are a good investment. This is not the same thing.
Think about a time when you have had to convince someone you know to lend you money. Maybe you have a rich uncle or grandparent who has offered you money. Every time you see the person they have reminded you of their great favor that you repaid with interest. With a private lender, you aren’t faced with this kind of situation. Once you make the money for the private lender, they want to give you more, not remind you of their kindness. As long as you deliver what you say and remain professional, you can have a private lender backing you for years.
The private lender will use their resources to either give you the money in cash form or secure the lending for you. This gives you the chance to use your talent and resources to provide them with a high ROI (return on investment). You are not only helping your own future, you are giving them a great investment. They will be able to create a promising future for themselves and their family, so it is a win-win situation for all those involved.
When you use a private lender, you can have more flexibility and options. They know a good investment and will recognize your drive and abilities. Their credibility will reflect on you and your real estate business. Once you form the relationship with a private lender, more than likely, you’ll have it for years to come.