Private 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 private money lenders are, in actuality brokers. Some of these people are both direct lenders and brokers. In these cases, the private money professional usually will fund only a couple small loans, or even fractionalized shares of the loans, per year and works as 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 deciding whether to buy a property with the aid of a broker or whether to simply go it alone without a professional.

Working With Direct Private Money Lenders

The upsides of working with a direct private money investor or lender are clear on the surface: you save money by cutting out the middle man. Brokers are compensated for their work by charging points on the private money loan, usually in addition to any points the end lender charges. Because of this, 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 find a private money investor directly who is willing to fund your particular transaction, you will be dealing directly with the end user or investor, avoiding the ?run around? that so many private money borrowers fall prey to. There are both positives and negatives to this.

By working with a direct private money investor, you can avoid any communication issues, and this may allow you to close more quickly. After all, no one knows your transaction like you do, no one can go over any items that the investor may have questions about better than you are able to, and no one is as committed to your business and your private money loan as you are. The flip side of this, though, 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 direct lender declines your loan, except to go back to calling around for another direct lender who’s perameters your loan may fit.

Benefits of Working With a Broker

The benefits of using a broker are also straight forward: a seasoned, well-informed, honest broker will have the knowledge of and access to the direct private money lenders and will know where your loan has the best fit. Having a broker work with you will give you the help you need to properly package your loan, discussing with you various information that will help you decide how much of a loan amount you can obtain, and what kind of terms you may be able to expect. A good broker will allow you to get through the application process and send it to the best direct private money lenders for your particular situation. Having a good broker may save you time and trouble in financing the transaction and be well worth the slightly higher cost.

When looking for private money, your decision to deal with a good, quality broker or directly with a private hard money individual will depend on whether you have a relationship with a investor directly and whether you are comfortable and prepared to talk about your loan request with the actual investor.