Private Lending – The Ins and Outs of Private Lending

Over the past 1-2 years, you may have experienced how strict the lending standards have become. If you have tried to obtain financing for anything in the past, it was probably easy and you were approved fairly quickly but the standards have greatly changed. Everyone was approved for some line of credit and that is, in part, one of the factors that helped bring down the economy and the housing market. There were too many unqualified people getting financing and were then unable to repay it, defaulting on their payments. Many houses were left vacant and possessions were repossessed, which left banks and finance companies with real estate and items they didn’t want.

Private Lending The turmoil from the past couple years has left banks and finance companies  less than thrilled about lending money and they have tightened their  standards. It is almost impossible for someone to get financing if they are a  small business owner or self-employed. This is the bank’s equivalent of being  unemployed or only having temporary work. In spite of the fact you can prove  substantial, steady income, you will still struggle to get financing. The lack of  financing will leave you with the inability to grow your business quickly and    you won’t be able to invest in anything new. It is frustrating to say the least but also a hindrance to you reaching your financial goals.

You want to achieve financial freedom and stability and the banks and lenders are not exactly willing to help you reach that goal. If you have ever run your own business or worked on your own, you understand the exhilarating feel of setting your own hours and using your own resources and assets to make a living. Without financing or help to grow your business, you can start to question your own abilities and ideas. This is not how you should feel; you are entitled to have goals and reach them through hard work, without feeling stupid or undeserving of funding. One of the most fickle business markets is real estate.

One year a property may be a sound investment and the next year it is not. If you have been in this business for any period of time, you are probably amazed at how quickly it changes. Because you know this fact about real estate, each and every investment has to be well-researched and budgetary guidelines must be put into place so that you can remain profitable even if things take a turn for the worst. The market dictates your profit but you can at least ensure you don’t lose everything if the market makes a downturn. A smart investor knows how to make that happen. It is because of this up and down investment return that banks and lenders are skeptical of giving money to real estate investors and companies. If the demand goes down, you’ll have an unused property and you may not be able to pay the mortgage on it. When you default, the bank gains a property when all they really want is the money.

There is no reason to rely on a banking institution for your future. The banks and finance companies are making it less and less possible for the average person with good credit, strong business plan, and credentials to get a loan for a project. Explore some other options that are working for others in the same situation. You are not alone with your goals and lack of funding; there is another way.

Maybe you’ve heard of private lending but aren’t sure exactly how it works. It sounds a bit sketchy and maybe as though you are doing business with foreign investors who want to nickel and dime you but that is simply not the case. Private lenders are those with money to lend to promising investments. They are aware that deals can go bad and they are prepared for that, if that should happen. It is an investment and they have chosen a market in which they feel they will make money. Some have chosen new and promising start-ups, others choose stocks, and some will choose real estate. Private lending in real estate gives you the opportunity to get the necessary financing without the use of a bank. It will provide you the ability to complete more deals and have less overhead and hassles.

Your personal network is one of your biggest resources and assets in the real estate business. Every time you meet a new friend or acquaintance, you should keep in mind that you may be able to help them find a home in the next couple years. It is a good idea to keep a list of contractors and private lenders available. There are some private lenders who prefer to invest in rehab properties while others will prefer a commercial center with rental incomes each month. There are some simple ways to secure a list of private lenders:

1. Get the word out that you are working with investors
2. Construct a business plan that is thorough and professional
3. Ask for references from those with whom you’ve worked in the past
4. Network with other agents and listen to others who have been successful
5. Create your bio to reflect success and allow people to get to know you for your website and social media sources

Private lending and funding will open a whole new world of success when you can secure it. The lenders are those with assets to lend and want to invest in success. They need you to help them achieve their own goals and all you have to do is convince them that you are the person they can trust. They already know they want to invest in real estate. Once you put the business plan in front of them, they will know within minutes if it is a good option for them. They are not going to remind you daily of the money they lent you but just expect to see the results you said were possible. Talk about options and limitless possibilities!

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