Private Lenders Role in Real Estate Investment Business
Private lenders are important in real estate investment business. Why? Well, a couple of years, may have been able to get relatively inexpensive loans from your local bank or savings and loan. But those days are gone as traditional lenders are tightening lending practices and in some cases, have gone out of business.
As real estate investor, you need access to buy what is both affordable and readily available, when so much is presented. Instead of seeking money from banks, savings and loans, and even hard money lenders who charge high interest rates, huge fees and two months closures why not consider private lenders as a better alternative.
Who are private lenders?
Private lenders can come from all walks of life. They may not know anything about real estate investing, but are simply in search of better returns on their money than they are getting to markets bank CD or money. Private lenders may be local business people, doctors, lawyers, accountants or even in some cases may be retirees with extra money to invest.
Private lenders are looking for investment returns in the range of 9% to 15%. Most markets bank CD or money is paid only 3% to 5% and private money gives them almost twice their current income. In addition, private lenders want to be secured by a pledge of local rental properties real estate. Most private lenders want to be able to actually see the property that is securing your investment and, in fact, will most likely drive by and see the property from time to time.
Private lending is the process of borrowing money from private lenders (not banks or financial institutions) at rates higher than private lenders usually available from banks or savings and loans from the CD or money market and guaranteed by local real estate rentals.
Private lenders come in many forms
Private lenders usually come in two forms. First mortgage lenders lend up to 90% to 95% of the purchase price and expect to fund the balance or use another private lender to finance the balance. Or second mortgage lenders will lend 20% and 30% down payment you need after you have arranged a bank loan for the first 70% to 80% of the purchase price.