In the first part of this article, we talked about some scenarios in which a real estate investor could benefit from a relationship with a private lender. It is important to realize that for every one of these scenarios, you can also benefit from being a private lender. Many real estate investors are also private lenders or use private lending income to supplement their real estate investing income, and vice versa. Of course, you should always consult with a financial professional before you borrow or lend money to make sure that your interests are protected in the lien paperwork.
- Investors with Large Portfolios
Even if you don’t buy in bulk, at some point as you build your real estate portfolio it is likely that lenders are going to start to get skittish. This is because each property that you buy has an impact on your credit score – even if you always pay on time or if you end up selling them off quickly. As a result, developing a relationship with a good private lender can aid your portfolio expansion dramatically. - Fast Flips and Other Last Minute Deals
Banks and other conventional lenders take time to make a decision about whether or not they are going to lend money and just how much they are going to lend. When it comes to real estate, sometimes you just plain need an answer fast. And sometimes, you might not even need the money for more than 24 hours or so anyway. In these situations, a private lender is probably the best solution because private lenders only have to go through one party – themselves – when they make a decision about lending.
Private lenders, who may also be called hard money lenders, are a great addition to your real estate investing network and can completely revolutionize your real estate investing business by creating a new source of funding for you. There are many ways to reach out to private lenders and get in touch with people who are ready to lend hard money, and we have covered some of those already in another article. Whenever you borrow money or lend it you should always do so with the legal assistance of an attorney who is familiar with the lending laws in your area and can advise you of how to best protect yourself in the event that your borrower defaults or your lender tries to change the terms of the loan.
Private lending represents a great opportunity for real estate investors on both sides of the lending equation. If you have not already factored in the possibilities that private lending can bring to your real estate investing career, then a more in-depth investigation is certainly in order.
