Obtaining Private Money Financing
Private money Lenders earn their money by making loans and providing loan services to individuals who need private money (financing that is secured by real estate.) Private money lenders can be direct private money investors or simply brokers. Most lenders are actually brokers, placing money for private individuals. Some private money lenders actually wear two hats, being both brokers and direct lenders. In these circumstances, the private money professional typically will fund only one or two small loans each year and plays the role of a broker to borrowers for the rest of the loans that come through the door.
Deciding if you would like to seek the services a private money broker or a private money lender is much like selecting whether to purchase a property with the with the aid of a real estate professional or whether to work directly with the seller and bypass the professionals.
Benefits Of Using A Direct Private Money Lender
The benefits of working with a direct private money lender or investor are easy to see: it will be less expensive if you go directly to the source. Brokers are compensated for the work they do through a portion of the points that are charged on a private money loan. It is for this reason, as you get more brokers lined up in your transaction, the more the money is going to cost you when everything is said and done.
If you have been lucky enough to be working with a end of the line, direct investor who is a good match for your project, will be talking with and presenting your project directly to the investor, and will be getting first hand information without having a middle man between you and the money. This can be both good and bad.
By working with the end investor directly, you can be assured that you are hearing your information and updates first hand, which may allow you to close your transaction more smoothly. After all, no one knows your particular situation the way you do, no one can explain any odd issues better than you are able, and no one is as committed to your business and your private money loan as you are. The other side of the coin, however, is working with the private money investor directly means that your loan either funds or it doesn’t, there are no other options if the private lender turns you down, except to go back to calling around for another direct lender who will fund your particular loan.
Why You Should Work With a Broker
The upside of working with a broker is also easy to see: a good, honest broker who has experience and who has been in the business a while will have built relationships with the direct investors with whom your loan scenario will fit. Having a broker work with you will give you the help you need to properly package your loan, improving the chances that you are able to obtain the loan you need at the rate and term that work for you in the least amount of time without the need for you to stress and continue to look and present your deal to investors you do now know. Working with a broker will allow you to properly package your deal (which is very important) and get it to the most likely direct private money lenders for your situation. This may reduce the stress, legwork and time it will take to complete your transaction.
When looking for private money, your choice to work with a private money broker or directly with a hard private money individual depends upon whether or not you personally know a direct private money lender and whether you feel comfortable packaging and presenting your funding request directly without professional help.
