4 Things Realtors and Brokers Should Share With Their Client

Private money can be a bit of a mystery to some, and sometimes it gets an unfair rap. Many investors and everyday buyers miss out on this option when looking at real estate because realtors and real estate experts themselves may not understand it or not trust it as an option. But private money loans are a legitimate, valuable tool for financing real estate.

When it comes to Private Money, here are 4 things you should know:

1. Private Money is simply a loan backed by a secured asset
   
   Private money lenders are people or businesses whose business it is to loan money. They back this money with secured pieces of property.  In this case, that asset is real estate.

2. Your loan will probably not be fully financed
   
   Private money loan lenders are Loan to Value driven and want to see that you have a stake in the game whether it is a purchase or refinance–That said, for example if you place a large down payment on the property (25-30%) that exhibits stake in the game to the lender and therefore would lend the remaining balance.

3. Private money rates are higher than conventional lenders 
   
   Private money loans are going to come with higher interest rates, but with good reason. Lenders understand that people seeking these loans probably cannot qualify for a traditional loan for a variety of reasons, so they need to protect themselves. With private money you can expect rates 7-10 percent…and 2 to 4 points. These rates are higher than a conventional lender, however, this doesn’t mean you cannot turn a profit if you are flipping the house, or if you are looking to buy your first family home.

4. More Flexible Terms and Faster Closings
   
   Use private money lending to your advantage.  Private loans offer a variety of lending options and terms which most conventional banks do not.  Whether you need a short-term fix and flip loan or long term fully amortized loan, both options may be available to you without all the red tape you may encounter at a conventional lender.

   Private money loans may not be the best option for everyone but they are a valuable and often overlooked tool. If you are looking to access funds quickly and are confident in your project, it could be a good option for you!