OfflinePrivate Lender Real Estate Financing
versus Conventional Mortgage
With the tight credit markets those investors that succeed most use private money.... Charlie
In today's uncertain economic climate, financing a real estate venture through a private lender is considered a viable alternative to seeking a conventional mortgage through a commercial institution. With commercial lending institutions folding under the pressure of the Wall Street crunch, private lending is becoming the preferred alternative to financing real estate.
Obtaining financing from a private lender is beneficial to real estate investors who seek immediate financing to close a deal. This helps to avoid hassles that occur with financial documentation that is routinely required by conventional lenders. Private lending enables real property investors to potentially close a deal much faster without having to endure the "red tape" of a conventional mortgage lender.
A real estate mortgage through a private lender is a very secure way to borrow due to the fact that this type of loan represents a significant percentage of the appraised property value with a lower loan-to-value ratio than a traditional mortgage lender. Additionally, the lender is able to make a quick decision that would otherwise take longer with a conventional institution, where it must be approved by a group of loan decision makers.
Fast Completion of Financing: Real estate financing via a private lender can potentially be completed within a week of the decision because the type of property being considered for financing is the primary factor in the decision instead of personal information pertaining to the borrower. When compared to a conventional mortgage lender, private lending criterion is more advantageous to the borrower because conventional mortgages require more details like the borrower's history, debt ratio, and overall financial situation.
No Current Financial Information: In some instances, it is necessary for the real estate investor to receive a decision immediately to avoid the loss of a potentially lucrative deal in a competitive marketplace. Using a private lender circumvents the requirement for personal financial information because the lender focuses on the value of the property being used for collateral. Obtaining funding from a conventional lending institution requires the borrower's personal information to be current. If the information is not current, the loan decision is delayed and inevitably, the borrower loses the deal.
No Credit and Debt Ratio: Conventional mortgage lenders focus on borrower credit and debt ratio as well as the type of property being financed. In this instance, the borrower may not be able to obtain credit or the type of property chosen does not represent the interests of the conventional mortgage lender. In this case, the private lender is the solution for the borrower as long as the property has a high value appraisal and produces sufficient cash flow to satisfy the loan.
Larger Loan Amount: Choosing to finance real estate through a private lender sometimes allows the borrower to receive a larger loan than one received through a conventional mortgage lender because the lender focuses on the appraisal. The conventional mortgage lender often poses penalties if the borrower acquires property at a discount to the appraisal. This means that the borrower must invest more of his/her own capital in the venture which would otherwise not be required with a private lending transaction.
Choosing to finance through a private lender is a great alternative to a conventional mortgage and offers more opportunity for creative financing for both the lender and the borrower and provides a win-win situation for both parties.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
Thank you for the clarity. The reason I did not buy Alan Cowgills program is that I simply did not trust him.
$800.00 is nothing, however, I want to be certain that what I am buying is going to enable me to reach my goals.
Not to come across like a jerk or anything, because that's not my way, but everytime someone mentions something about hard money, you often come back with positive comments, however when others such as myself discuss it, you come across with comments like myself and others know nothing.
I am very much involved with hard money lending. I know the guidelines very well and others here know things as well about this subject. I am constantly adding new funders and new clients. I have closed many hard money deals, so I must know what I am doing.
The hard money lenders I represent, get their funds from many different sources such as entertainers and athletes, wealthy individuals, pension plans, insurance companies and others who choose to have their funds provided as strictly hard money, where there is interest charged and the points go to the broker. I cannot speak for them as to why they choose to do things the way they do.
I commend Tammy for learning the things she is and going places with it and always look forward to reading her threads.
If you're interested in learning about the private money I'm learning about, I have a program I REALLY like, and they are the genuine article like Dean. They answer all the questions personally. I mentioned them in my journal, but I can PM it to you if you'd like.
Your journals are probably vast, so please pm it to me. Also one of my funders has something that may interest you. It is a directly that lists 25,000 accredited private investors. The price is about $595.00 for one and I think there is a cheaper one if I am not mistaken.
I will post their website link later today.
John:
Why is Brookview so difficult to deal with? I sent two clients over there and they were basically shut out from the start and a new client told me not to bother bringing him to Brookview.
He has a credit score of 887, 5 years in the real estate business, his company has done 350 transactions, all verified, it took me four hours to look at it, and they wanted money to buy and after a period of time, refi out.
I placed them with another hard money lender, and right now, they are doing 15 deals a month and moving into multi families next month and they have 13 deals that meet their needs.
I told Brookview in my introduction letter that these guys were serious. I would hope that it was just a case of who they were going to deal with.
to hear how Dean describes private money lending on the Edge 2010 DVDs. To summarize what he said, private lenders are private individuals that lend to you directly and you work out the terms with them. IE investors between deals.
Now there's the clarification directly from the man himself if there was any doubt from this thread.
Thanks for providing the information on Private Funding as it pertains to the SEC guidelines. You have definitely done your homework. I plan on setting up an appointment with a SEC attorney before soliciting private investor funding.
Tom
the info you provided was very helpful, thanks again
Regards
Tom
Went to Brookfield financial website http://www.brookviewfinancial.com/ still ask for same documentation like a regular loan. State the lend at 65%. They do include rehab, as long as under the 65% ARV. Anyone used them?
Stephanie