Toby McCosker Successful Real Estate Investors Prefer Private Lenders
According to most real estate investors, private money
refers to lending money to an individual or company by a private individual or group of private individuals. For investors private money is a safe and easier way to get your hands on cash compared to banks.
Another reason why investors prefer private money
over banks is because having a private lender creates a relationship where you help friends, family and meet a great group of people. The most important reason why real estate investors need private money is unlike banks your lenders usually won't pull the rug out from under you and close out all of your credit accounts.
When a good opportunity comes their way, they can
take advantage because they know the money available and waiting for them. While their competitors are scrambling around applying from bank to bank, investors with private lenders may have already made an offer and closed the house.
You can make offers with confidence Fast closings - buy at a discount and outshine the
competition No credit checks - private lenders look at the investor, not their finances Unlimited funds - more lenders means more investment capital No need for a partner and its cheaper - DON'T give up half the profits You get some of your profit when you buy Control - YOU SET THE RULES!
Utilizing private money can give you access to
unlimited funds. As the lender makes better than average returns on their investment they are also secured by a real tangible asset. The speed of private money compared to traditional bank financing is astonishing. If the right relationships are made and cultivated between a real estate investor and their private lenders in less than an hour they can have they funds deployed for an opportunity that arises.
Another disadvantage of banks is cash flow. Cash flow
can be defined as a measure of an investor's liquidity that usually consists of net income after taxes plus noncash charges against income. In plain english, how much cash an investor has available to them right then against how much they have to pay out before more cash comes in.
Cash flow is important to a real estate investor's
business because it presents a record of something that has happened in the past and can affect future, representing what a real estate investor expects to take in. Borrowing too much money can lead to decreased cash flow and payments can even overtake income in some cases; this is why many loan payments are limited to a certain percentage of a borrower's income.