What is Private Money Lending in Real Estate?

What is Private Money Lending in Real Estate?
  • Opening Intro -

    Initially, real estate was considered a very lucrative industry by both banks and other companies that offer mortgages.

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However, the financial market conditions have changed today thus making it difficult for people to get mortgages from the banks so as to fund real estate investments. This has left people who want to venture into real estate with limited opportunities of where to get funds for their investments. The solution is to engage in private money lending in real estate.

What is private lending in real estate?

Private money lending is a process which involves a non-bank institution or a person who loans money to people to finance a real estate investment. It entails a real estate investor taking a loan from a private person or company and paying some interest to the lender. When the term ends, the real estate investor pays back the original amount plus the interest. It is usually secured by a deed of trust or a note or in the form of a mortgage through the property that has been bought using the money.

The private money lenders may involve individuals who have saved money in their bank accounts, thus they want to invest part of their money in exchange for a good return.

How can you find Private Money lending in real estate?

You can find private money lending in real estate by asking around or online search. This is because most of these people are the individuals who live around you, but you would not easily tell unless you inquire from others. Are you looking for a private lender for real estate? Search no more by simply inquiring from your neighbors and friends or checking them online.

Why do people prefer private money lending in real estate?

  • Private money lending involves a fixed interest rate of about 8% to 15% on the loan. This is a better return for lenders than if their money is invested in banks that offer about 0 to 5% interests.
  • The process is very secure as the lender has a lien on the property bought by the real estate investor. Therefore, in case the owner defaults payment, he can easily get his money back. Most of the lenders also like this process as the money is secured and can’t vanish like in stock market investments.
  • In case of liquidation of the property, the private lenders can receive their money because the process offers them an equity buffer since the real estate owner typically buys the property at a discount on the market.
  • The process is faster than bank loan processing. The terms are also flexible and the real estate’s owner gives the private lender’s name to the insurance company so that the money lender can get the cash back from the insurance corporation if there is fire hazard or a natural disaster.
  • The real estate investor can also get different private money lending of any amount to use to finance any type of property.

Are you stranded or unsure about how you can get funding for your real estate deal? Consider using private money lending.

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