November 11, 2020

5 Advantages of Real Estate “Private Lending” That Your Guru Didn’t Tell You

As mentioned in our discussion, Lending Gurus have yet to tell you the advantages of private lending services. This is because they would want you to partner with them rather than investing elsewhere. An investment with a private sector is beyond different from those made with commercial banks in various aspects. Most of these differences are of great benefit to the lender and sometimes the investor like you. 

Private lending to real estate investors is a suitable option in the market today with everything that is currently happening around us. Conventional and Commercial banks have continued with their view of money lending as an act of taking advantage of spreads of higher interest rates that progress over time. Still, private lending has now similarly focused on borrowers’ investment properties, wherein both parties share equal benefits. 

Ideally, private money lenders’ objectives are well-aligned with those of the investors; therefore, they would benefit both. Here are five unique and advantageous benefits of engaging in private lending with real estate investors compared to other forms of investment:

You Are In Full Control

Creating a partnership with a private lender can prove beneficial in controlling how the relationship would pan out. As a private lender, the loan terms will depend entirely on the investor and agreed upon by both parties. In return would lead to a better financial portfolio since the terms are within your discretion.

Guaranteed Measure Over Return Of Investments (ROI)

Compared to investing with banks of commercial likeness, the interest rates and returns are computed in terms that are not favorable or measurable to the investor. It’s because since you aren’t in total control, you are more likely to create a larger window for risks. 

This, in return, does not give you the assurance nor the power to forecast what the returns could be, and it leaves you blindsided. As mentioned, private Lending will rely on your terms or the terms agreed upon, making it easier to project the movement. Keep in mind that you are sure to get a specific return since you came up with the loan terms.

Short Period Return

If you haven’t noticed, lending from commercial banks and lending services has fixed terms when the returns are generated. On the other hand, private lending would project a shorter period for returns because the words were set on your end once again. Above all of this, these high returns on the investment made prove to be feasible and quick. The time taken to repay private money loans is usually short therefore ending the contract becomes quicker. 

Accepting Real Estate As Collateral

One of the reasons why commercial banks and or lending services would fail to approve a loan to you as an investor would be not knowing whether you would pay them back. This would mean that they require a lot of proof and or down payment to ensure that you aren’t going to run away from them. As an investor, there may be circumstances that you only have a certain amount and would not be capable of coughing up more; using your real estate as collateral will assure private lending services that you are willing to pay them back.

It’s An Easier Process

The paragraph above explains that with commercial banks and lending services, the approval process can be tedious and time-consuming; therefore, the process will be complicated without guarantee success. Private Lending Services become easier because there is nothing to delay the issuance of money. The property can be used as collateral since it would be in terms that you have agreed upon; there are no added steps to take. 

Private Lending isn’t something you should be afraid of considering as an option to kickstart your business in the industry. As long as you can both agree on the terms and have contracts drafted to secure both parties, then there’s nothing to worry about. Always remember that there is no business out there free of risks. It’s always up to whether or not you’re willing to take that leap.

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  • Maurice graduated from the University of St.Thomas  Houston, Texas, with a degree of Bachelor in Business Administration. 
  • He received his Loan Officer’s License in 2005
  • He also worked in Wells Fargo and Bank of America. 
  • Maurice established Value Funding Inc. in 2010
  • He enjoys working with Investors and providing financing using a NO DOC Loan Strategy in Residential and Commercial Real Estate

Disclaimer: The blog articles are intended for educational and informational purposes only. Nothing in the content is intended as legal or financial advice.