subject: REIWIRED: Knowing More About Private Money Financing [print this page] Author: Daniel Mc Grey Author: Daniel Mc Grey
In life, there are things we could live without. For example, you probably wont need to learn how to fly a spacecraft unless youre an astronaut or in a related field. But if youre into real estate investing, private money financing is something you need to know more about. Sometimes seen as a last resort, the image of this kind of financing has changed over the past few years primarily due to borrowers who are into real estate investing. Real estate investors continue to use private money to fund deals, and in the process uplift the image of it. Also known as hard money, it is no longer seen by many today as a suicide move. Nowadays, it is real estate investors who are going after lenders. We could safely attribute the last resort image of these lenders is due to the high interest they are using. However, the first thing borrowers have to understand is that private money lenders are merely private individuals who have extra money. Unlike traditional lenders, they are more exposed to defaults; they fund loans that banks find too risky to finance. If it were you, you will probably impose a high interest as well. These lenders main motive is to earn from their extra money and protect their capital. Despite the high interest, real estate investors still use this kind of financing. Thats because they are more concerned with what they will pocket with the help of private money and not how much they will lose because of its high interest. Rehabbers, for example, are able to fix and flip houses using only hard money. They no longer have to spend personal money or seek other loans just to proceed with a project. In this financing, the cash you will get is often enough for you to buy a house, repair it, and sell it. If you borrowed money from traditional lenders like banks, you will only get a loan to buy the house. If you want to rehab it, you will need to seek financing from other sources such as other banks, credit cards, or worse, your personal money. In houses worth around $100,000 in good condition, rehabbers pay a private money lenders as much as $5,000. But if you were able to rehab a house without spending ay personal money and earn $30,000 from it, would you still mind paying $5,000? Only wise real estate investors will understand that investing is earning profit using other peoples money. Found this article helpful? Go to REIwired.com today and learn more about hard money.About the Author:
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