Why Use Private Money For Real Estate Investing?

There are many reasons a real estate investor might want to have a ready access to private money for real estate investing. This article will explore a few of those reasons.

The first reason to use private money for real estate investing is to protect your credit rating. Think about this… if you borrow the money from a private individual, rather than a bank or lending institution, the loan will never be reported to the credit bureau. It won’t count against your debt-to-income ratio, and no record of the payment history will be kept. No one will ever know about that loan, unless you tell them.

Next, and one of the very best reasons to use private money for real estate investing, is the elimination of paperwork. I have never had to complete a loan application for private money for real estate investing. The lenders I work with all know me and the kind of investing I do. Many of them never even care to see the property. When I apply for a mortgage, on the other hand, the application process itself can take several days, and there are mountains of paper.

Yet another reason to use private money for real estate investing is the ready access to fast cash. Sometimes, when a deal is especially good, moving super-fast is a necessity. With bank financing, that kind of speed is often impossible. Even lines of credit don’t always give you the same speed capability that private lenders do. With one phone call to one of my private lenders, I can tie up a deal that other investors only dream about.

A great reason to use private money for real estate investing is the leverage that it gives you. Think about this… if you have $50,000 of your own money, is it better to pay all cash for a $50,000 property, or to put $50,000 cash down on a $500,000 property and use private lenders to finance the rest?

If you answered the $500,000 property, you’re right- and here’s why. Let’s say the $50,000 property rents for $500 per month, or $6,000 per year. Your Return On Investment (ROI would be 12% the first year ($6,000 divided by $50,000). It’s safe to assume the rent on the $500,000 property might be about 10 times that of the $50,000 property, or about $60,000 for the year. If your payback to your lender totals $4,000 per month, or $48,000 per year, what’s your Return On Investment (ROI) for the $500,000 property? If you answered 24%, give yourself a gold star!

Of course, you would need to take into account the cost of borrowing the money, but even after doing that, you can see there really is no comparison. Using private money for real estate investing gives you something called leverage. Leverage is the ability to move something very large with something very small… a lever. The lever, in this case, is your small amount of cash ($50,000). With it, you can “move” or control a $500,000 property, because the private lender’s money increases the power of your “lever”.

Here I’ve given you a few of the many great reasons for using private money for real estate investing. There are more, but you should have a clear picture of why private money can be so useful in your real estate investing toolkit. If you would like more information, I have written another article on my website titled Private Money For Real Estate Investing.

Now, go make more offers!

Why Use Private Money For Real Estate Investing?

There are many reasons a real estate investor might want to have a ready access to private money for real estate investing. This article will explore a few of those reasons.

The first reason to use private money for real estate investing is to protect your credit rating. Think about this… if you borrow the money from a private individual, rather than a bank or lending institution, the loan will never be reported to the credit bureau. It won’t count against your debt-to-income ratio, and no record of the payment history will be kept. No one will ever know about that loan, unless you tell them.

Next, and one of the very best reasons to use private money for real estate investing, is the elimination of paperwork. I have never had to complete a loan application for private money for real estate investing. The lenders I work with all know me and the kind of investing I do. Many of them never even care to see the property. When I apply for a mortgage, on the other hand, the application process itself can take several days, and there are mountains of paper.

Yet another reason to use private money for real estate investing is the ready access to fast cash. Sometimes, when a deal is especially good, moving super-fast is a necessity. With bank financing, that kind of speed is often impossible. Even lines of credit don’t always give you the same speed capability that private lenders do. With one phone call to one of my private lenders, I can tie up a deal that other investors only dream about.

A great reason to use private money for real estate investing is the leverage that it gives you. Think about this… if you have $50,000 of your own money, is it better to pay all cash for a $50,000 property, or to put $50,000 cash down on a $500,000 property and use private lenders to finance the rest?

If you answered the $500,000 property, you’re right- and here’s why. Let’s say the $50,000 property rents for $500 per month, or $6,000 per year. Your Return On Investment (ROI would be 12% the first year ($6,000 divided by $50,000). It’s safe to assume the rent on the $500,000 property might be about 10 times that of the $50,000 property, or about $60,000 for the year. If your payback to your lender totals $4,000 per month, or $48,000 per year, what’s your Return On Investment (ROI) for the $500,000 property? If you answered 24%, give yourself a gold star!

Of course, you would need to take into account the cost of borrowing the money, but even after doing that, you can see there really is no comparison. Using private money for real estate investing gives you something called leverage. Leverage is the ability to move something very large with something very small… a lever. The lever, in this case, is your small amount of cash ($50,000). With it, you can “move” or control a $500,000 property, because the private lender’s money increases the power of your “lever”.

Here I’ve given you a few of the many great reasons for using private money for real estate investing. There are more, but you should have a clear picture of why private money can be so useful in your real estate investing toolkit. If you would like more information, I have written another article on my website titled Private Money For Real Estate Investing.

Now, go make more offers!

Why Use Private Money For Real Estate Investing?

There are many reasons a real estate investor might want to have a ready access to private money for real estate investing. This article will explore a few of those reasons.

The first reason to use private money for real estate investing is to protect your credit rating. Think about this… if you borrow the money from a private individual, rather than a bank or lending institution, the loan will never be reported to the credit bureau. It won’t count against your debt-to-income ratio, and no record of the payment history will be kept. No one will ever know about that loan, unless you tell them.

Next, and one of the very best reasons to use private money for real estate investing, is the elimination of paperwork. I have never had to complete a loan application for private money for real estate investing. The lenders I work with all know me and the kind of investing I do. Many of them never even care to see the property. When I apply for a mortgage, on the other hand, the application process itself can take several days, and there are mountains of paper.

Yet another reason to use private money for real estate investing is the ready access to fast cash. Sometimes, when a deal is especially good, moving super-fast is a necessity. With bank financing, that kind of speed is often impossible. Even lines of credit don’t always give you the same speed capability that private lenders do. With one phone call to one of my private lenders, I can tie up a deal that other investors only dream about.

A great reason to use private money for real estate investing is the leverage that it gives you. Think about this… if you have $50,000 of your own money, is it better to pay all cash for a $50,000 property, or to put $50,000 cash down on a $500,000 property and use private lenders to finance the rest?

If you answered the $500,000 property, you’re right- and here’s why. Let’s say the $50,000 property rents for $500 per month, or $6,000 per year. Your Return On Investment (ROI would be 12% the first year ($6,000 divided by $50,000). It’s safe to assume the rent on the $500,000 property might be about 10 times that of the $50,000 property, or about $60,000 for the year. If your payback to your lender totals $4,000 per month, or $48,000 per year, what’s your Return On Investment (ROI) for the $500,000 property? If you answered 24%, give yourself a gold star!

Of course, you would need to take into account the cost of borrowing the money, but even after doing that, you can see there really is no comparison. Using private money for real estate investing gives you something called leverage. Leverage is the ability to move something very large with something very small… a lever. The lever, in this case, is your small amount of cash ($50,000). With it, you can “move” or control a $500,000 property, because the private lender’s money increases the power of your “lever”.

Here I’ve given you a few of the many great reasons for using private money for real estate investing. There are more, but you should have a clear picture of why private money can be so useful in your real estate investing toolkit. If you would like more information, I have written another article on my website titled Private Money For Real Estate Investing.

Now, go make more offers!

Why Use Private Money For Real Estate Investing?

There are many reasons a real estate investor might want to have a ready access to private money for real estate investing. This article will explore a few of those reasons.

The first reason to use private money for real estate investing is to protect your credit rating. Think about this… if you borrow the money from a private individual, rather than a bank or lending institution, the loan will never be reported to the credit bureau. It won’t count against your debt-to-income ratio, and no record of the payment history will be kept. No one will ever know about that loan, unless you tell them.

Next, and one of the very best reasons to use private money for real estate investing, is the elimination of paperwork. I have never had to complete a loan application for private money for real estate investing. The lenders I work with all know me and the kind of investing I do. Many of them never even care to see the property. When I apply for a mortgage, on the other hand, the application process itself can take several days, and there are mountains of paper.

Yet another reason to use private money for real estate investing is the ready access to fast cash. Sometimes, when a deal is especially good, moving super-fast is a necessity. With bank financing, that kind of speed is often impossible. Even lines of credit don’t always give you the same speed capability that private lenders do. With one phone call to one of my private lenders, I can tie up a deal that other investors only dream about.

A great reason to use private money for real estate investing is the leverage that it gives you. Think about this… if you have $50,000 of your own money, is it better to pay all cash for a $50,000 property, or to put $50,000 cash down on a $500,000 property and use private lenders to finance the rest?

If you answered the $500,000 property, you’re right- and here’s why. Let’s say the $50,000 property rents for $500 per month, or $6,000 per year. Your Return On Investment (ROI would be 12% the first year ($6,000 divided by $50,000). It’s safe to assume the rent on the $500,000 property might be about 10 times that of the $50,000 property, or about $60,000 for the year. If your payback to your lender totals $4,000 per month, or $48,000 per year, what’s your Return On Investment (ROI) for the $500,000 property? If you answered 24%, give yourself a gold star!

Of course, you would need to take into account the cost of borrowing the money, but even after doing that, you can see there really is no comparison. Using private money for real estate investing gives you something called leverage. Leverage is the ability to move something very large with something very small… a lever. The lever, in this case, is your small amount of cash ($50,000). With it, you can “move” or control a $500,000 property, because the private lender’s money increases the power of your “lever”.

Here I’ve given you a few of the many great reasons for using private money for real estate investing. There are more, but you should have a clear picture of why private money can be so useful in your real estate investing toolkit. If you would like more information, I have written another article on my website titled Private Money For Real Estate Investing.

Now, go make more offers!

Real Estate Investing Scare

Just recently, I was consulting a former Real Estate Investor that was in a serious situation that would scare anyone. This investor has twenty-eight properties that he’s personally purchased using bank financing over the last 4 years.

Here’s the typical deal this investor would purchase: The house would have an appraised value of $50,000 and he was able to purchase the property for $30,000.

The bank would then loan him 80% of appraisal regardless what he paid for the property allowing him to cash money out at closing when buying.

OK, follow me so far? So, in this example, he’d pocket $10,000 when he bought the property.

So, you’re thinking - that’s not scary.

Not yet anyway…

Back to the story, he calls to see if I can help by buying the properties from him. I told him I would gladly take a look to see if there was something I could do, but I assured him I couldn’t make any promises.

After, I talk with him a little more, I discover he’s 3 months behind on payments on ALL 28 properties. With all 28 properties, one would need to come up with close to $20K just to reinstate these loans.

But, that’s not the scary part. We still have to see if there’s any equity. And unfortunately, there’s not, therefore I tell him I can’t do anything for him. He’s gonna see 28 houses go to the foreclosure block. Not only will the bank foreclose, they’ll drag his name through the paper causing humiliation, disgrace with his family and his church. The bank doesn’t just foreclose, then go away. They’re gonna stay after him till they get paid. If the bank takes a loss on these properties, which they will, the bank will pursue the following options:

1. Deficiency Judgment:

This will attach to anything this homeowner owns (real estate, cars, boats, motorcycles, etc.) till the debt is paid. Judgments are usually good for a set amount of time. In Alabama, the company has 10 years they can pursue the homeowner to get paid on the judgment. Plus, you should be aware that these judgments then can be renewed after they’ve lapsed.

It’s pretty terrifying to say the least to have some attorney harassing you to collect on a debt.

2. Garnish Wages

After a judgment has been attained, the creditor can and will garnish any wages from the borrower’s pay.

3. Forgive The Debt

Maybe, you think the borrower would love for the bank to just forgive the debt. Even though they forgive the debt, they don’t forget. Because at the end of year they’ll send the borrower a 1099 for unearned income from the loss of the sale of the property they’d loan money on.

Finally, the obvious factor of having a foreclosure is the fact it shows on your credit rating, thus ruining your credit.

Why did I just tell you this information about this particular owner?

I want you to be able to make sellers aware that are in similar situations of exactly what they can expect. See, most investors expect a homeowner to make some logical decision during a totally emotional time like a foreclosure proceeding. Most owners react out of fear, thus making the wrong choice, which is doing nothing but watching the sheriff show up to finalize the eviction after the house has been foreclosed.

Why Use Private Money For Real Estate Investing?

There are many reasons a real estate investor might want to have a ready access to private money for real estate investing. This article will explore a few of those reasons.

The first reason to use private money for real estate investing is to protect your credit rating. Think about this… if you borrow the money from a private individual, rather than a bank or lending institution, the loan will never be reported to the credit bureau. It won’t count against your debt-to-income ratio, and no record of the payment history will be kept. No one will ever know about that loan, unless you tell them.

Next, and one of the very best reasons to use private money for real estate investing, is the elimination of paperwork. I have never had to complete a loan application for private money for real estate investing. The lenders I work with all know me and the kind of investing I do. Many of them never even care to see the property. When I apply for a mortgage, on the other hand, the application process itself can take several days, and there are mountains of paper.

Yet another reason to use private money for real estate investing is the ready access to fast cash. Sometimes, when a deal is especially good, moving super-fast is a necessity. With bank financing, that kind of speed is often impossible. Even lines of credit don’t always give you the same speed capability that private lenders do. With one phone call to one of my private lenders, I can tie up a deal that other investors only dream about.

A great reason to use private money for real estate investing is the leverage that it gives you. Think about this… if you have $50,000 of your own money, is it better to pay all cash for a $50,000 property, or to put $50,000 cash down on a $500,000 property and use private lenders to finance the rest?

If you answered the $500,000 property, you’re right- and here’s why. Let’s say the $50,000 property rents for $500 per month, or $6,000 per year. Your Return On Investment (ROI would be 12% the first year ($6,000 divided by $50,000). It’s safe to assume the rent on the $500,000 property might be about 10 times that of the $50,000 property, or about $60,000 for the year. If your payback to your lender totals $4,000 per month, or $48,000 per year, what’s your Return On Investment (ROI) for the $500,000 property? If you answered 24%, give yourself a gold star!

Of course, you would need to take into account the cost of borrowing the money, but even after doing that, you can see there really is no comparison. Using private money for real estate investing gives you something called leverage. Leverage is the ability to move something very large with something very small… a lever. The lever, in this case, is your small amount of cash ($50,000). With it, you can “move” or control a $500,000 property, because the private lender’s money increases the power of your “lever”.

Here I’ve given you a few of the many great reasons for using private money for real estate investing. There are more, but you should have a clear picture of why private money can be so useful in your real estate investing toolkit. If you would like more information, I have written another article on my website titled Private Money For Real Estate Investing.

Now, go make more offers!