How to Use Private Money for Real Estate Investing
When it comes to maximizing your net worth, investing is the best way to go about it and one of the most popular forums for doing so is real estate.
There are many benefits to real estate investment as it can provide an enormous amount of equity for an investor. However, for newcomers the process can be a bit complex and confusing as you might not know exactly how to go about it or where to get the money.
That is where private money lenders come in.
What is a Private Money Lender?
Private money lenders offer many benefits that make them extremely ideal and competitive when comparing them to most banks. Typically, they offer low risk loan programs with minimum transactional costs and fees. They also provide plenty of guidance and flexibility to make their collaborations efficient and effective for the investor.
In comparison with banks, private money lenders can grant an investor a loan at a lower interest rate, get that loan approved at a faster and more convenient rate, and do so with only a minimum amount of paperwork so as not to slow down the process tremendously.
What happens when you find a private money lender for your investment property?
Once you find a private lender, you need to have a solid investment plan in order to acquire the money you need. This would typically involve finding a piece of real estate and using it and your lender’s loan to grow your equity over a period of time.
When it comes to the strategy itself, you will need to start by getting the property appraised. An appraisal allows you to measure your property’s initial market value. It can also help in determining your LTV ratio as it informs your lender as to how much money they want to give you.
Once you get the money, you can invest into your property through a multitude of means such as purchasing the property, renting it out to tenants, reconstruction/rehab, sell it off, or hold onto it. Any strategy has potential as long as the lender understands where their money is going towards.
The use of the private money itself comes in the form of budgeting your resources in relation to your strategy and building a sustainable timeline. Oftentimes, private lending terms are short-run, but it can all depend on what type of loan program you are under and what type of private money lender you are lending from.
Depending on your investment plan, you can build upon your property through the resources of your private lender and your loan. Thus, as your property increases in market value, your equity grows as well as you own that property. And that property serves as an asset to which you can sell off or get appraised so as to evaluate how much your investment has grown.
Keep in mind that in order to get the best value out of your property, you need to choose your resources wisely as cheap does not always guarantee quality results. But as far as your budget is concerned, doing simple and cost-efficient alterations can massively boost your property’s value through a low-key, marginal sense.
And if your strategy includes tenancy, you can grow your equity even more as you can earn revenue through rent. You can even use this to pay off your debt to your lender.
Either way, once your property reaches a market value that you find satisfying, you can come out of the venture with more money than you started.
The biggest con when evaluating private money is that it is typically quite expensive; however the value that you receive upon getting your investment plan backed by a private lender is well worth the ticket as they offer an enormous amount of support in getting you on the right program, aiding you in your strategy, and getting you the results that you desire.
Are you looking to become a real estate investor?
As an investor, private money lenders are a worthwhile investment for growing your equity. And for the lenders themselves, they can reward themselves with quality relationships on top of strong credit lines.
Looking for financing for an investment property? or are you interested in learning more about the private money lending process? Contact Us today!