The Best Game in Town: Private Money

the following is an exerpt from: "21 Ways To Finance Your Real Estate Deals" Without Using Your Own Cash or Credit”

By Chris Yates.

Why Private Money?

Whether you have a long term or short term real estate investment strategy, private money lending is the single best way to fund the growth of your real estate portfolio. Private money lending works the same way as borrowing money from a bank, but the bank is a private individual with little or no stringent lending criteria who simply receives a Note and Deed of Trust or Mortgage (depending on the state you are investing in) in exchange for funding your deal.

Private money lenders can bring speed and efficiency to your transaction by asking fewer questions and moving money faster. Being able to offer a fast closing with private funds will motivate sellers to take your offer over your competition, and will entice them to take a much lower price from you than they would from a conventional buyer.

Low Costs, Flexible Terms:

Private Money Loans are very cost effective, with rates usually ranging from no points and 8% interest, to 3 points and 15%. Pricing and terms should vary depending on the overall risk associated with the deal. Private money lenders can provide various types of funding starting with "flash cash" (when you only need funds for a few days) to longer term notes as long as 5 years or more. Lenders may elect to receive interest payments monthly, quarterly, annually, or at the time of loan maturity.

Transaction fees on Private Money Loans are much lower than most as private money lenders do not have underwriters, processors, etc. on staff, and do not require nearly as much paperwork as conventional or government-backed loans.

Why you should protect them, and how:

As a professional real estate investor, you will want to protect the interests of your private money lenders as well as your own. We suggest providing them with the following documents to secure their investment capital:

  • Promissory Note
  • This is your lender's collateral for their investment capital
  • Deed of Trust, or Mortgage (varies based on state)
  • This is the document that is recorded with the county clerk and recorder to publicly secure their investment against the real property that you areas as collateral
  • Hazard Insurance Policy
  • List the Private Money Lender as the "Mortgagee" to protect them in case of fire or natural disaster, etc.
  • Appraisal (optional)
  • Many private money lenders will simply research the value of a property online before making an investment decision. As many of your acquisitions will be properties that require significant renovation, an appraisal may not be necessary to establish value if your purchase price is obviously well below market. If a private money lender does require an appraisal, be sure to give the appraiser a copy of your renovation scope of work with total renovation cost and ask the appraiser for an ARV (after repaired value) figure on the appraisal.

100% financing still exists!

Private money lenders rarely require a down payment from you and may fund both your purchase and renovation of the property, or more! In many instances, we have purchased a property so far below market value that our lenders have actually funded our purchase of the property, all the renovation costs, AND allowed us to receive cash at the purchase closing to put towards our operating expenses and receive an initial profit up front.

This sounds great, but where do I find these private money lenders?

Private money lenders can be family members, friends, business partners, professional or personal acquaintances, attorneys, accountants, business owners, or strangers. Anyone that you come into contact with could be a potential private money lender for your real estate investment deals.

What's in it for them?

Fixed returns on their capital providing better profits than almost all other investment vehicles, secured by real assets at below market value, insured against fire, theft, vandalism, and natural disasters, and the ability to do all of this completely tax-free within their retirement accounts if they desire.Need we say more?

Where do the funds come from?

The first seven strategies we will cover in this e-book highlight sources that private lenders can tap in order to take advantage of the incredible investment opportunities that you are about to open up for them.

To read the rest of ”21 Ways To Finance Your Real Estate Deals" Without Using Your Own Cash or Credit” By:Chris Yates, and learn about other private money lending and real estate investing strategies, visit CMYatesnews.com and purchase the ebook.You can also visit CMYatesCapital.com to learn even more about private money lending and how to begin earning great returns on your investment through private money lending to real estate investors.