When Do You Need Private Money Lending

Private money lending is probably the most flexible type of financing you’ll ever get for your real estate investments. Unlike traditional bank loans, you can use private money however and wherever you want. In this type of financing, there are no certain restrictions that can put a damper on how you make money in real estate, which is why if you’re in need of cash for you investment properties, you’ve got to consider securing private loans.

Basically, private money is a type of financing offered by private individuals and small lending companies. It is mostly asset-based, meaning a private money lender relies on the value of the property offered as collateral to verify a loan’s eligibility. For an investor, securing this type of financing can give him a definite advantage when investing in real estate. Here are some of the common uses of private money loans:

When flipping or rehabbing homes. As you may know, banks, mortgages companies, and credit unions don’t usually lend money for the purchase of a dilapidated property because they want don’t want to be saddles with a deadbeat property in case a borrower defaults on his loan. With private money lending, however, you can secure the financing you need to buy a handyman special since what’s important for the lender is the value of the property once it has been repaired and renovated, not its current worth.
When wholesaling bank owned homes or REOs. One of the challenges in wholesaling properties owned by banks and lenders is that you cannot easily assign the contracts of REOs unlike conventional single-family homes. This is the reason why most investors use double closings, wherein the investor buys the property from the bank before selling it to an end buyer, to close deals. If you want to use double closing but you don’t have enough cash to buy the property from the bank, you can use private money as transactional funding.
When making real estate investments with a bad credit. As long as the he is borrowing funds for a property with high profitability and marketability, a real estate investor can obtain the assistance of private money lenders regardless of his credit rating.

Private money lending is indeed a great help for cash-strapped real estate investors. If you want to know where you can find a good source of private money, log on to www.RehabHardMoney.com. The website can hook you up with a reliable lender wherever you are in the U.S.

In Segment 2, learn about how much the real estate investing environment has changed in just last year, and how you can use transactional funding to flip houses.

When Do You Need the Assistance of Hard Money Private Lenders?

Although there are certain methods of investing in real estate that don’t require massive investment capital for you to get started, it is still important to have an access to a good source of funds. It is because there are certain instances that you will require quick cash to complete a real estate deal.

Some of the best and common sources of quick funds for real estate deals are hard money private lenders. Unlike banks, mortgage companies, and other traditional lending institutions, these financiers employ a shorter underwriting process that enables real estate investors to obtain fast cash. In addition, most of them are not particularly concerned if a borrower has less-than-stellar credit rating. This makes hard money lenders ideal money partners for real estate entrepreneurs who are having problems with their credit scores.

Meanwhile, here are some of the instances when you might need the services of these non-traditional lenders:

When buying distressed properties. As we all know, competition for foreclosed, distressed, and undervalued properties has become tougher than before. If you don’t have enough funds to quickly close a deal with a seller, you might miss a great opportunity to make money in real estate as other investors would be jumping all over the house that you failed to buy.
When rehabbing a house. Obtaining the assistance of hard money private lenders can be very useful when doing a rehab project. For starters, you don’t have to worry about paying for the cost of repairs and other expenses since most hard money loans have a loan-to-value ratio of 65%. So if you’re going to rehab a ,000 home with an after repair value of 0,000, you’ll get about ,000. You can spend ,000 for the purchase of the property and use the remaining funds to pay for the repairs and other expenses.
When wholesaling bank owned homes. If you’re going to do a wet closing to wholesale REOs, you’ll need transactional funding to close the A-to-B transaction with the bank. And since hard money lenders utilize a shorter underwriting process, you can quickly get the funds you need and close the transaction with the bank or the lender in a flash.

Hard money private lenders can a great help to a real estate investor like you. So if you want to make your job much easier, get yourself acquainted with these creative financiers now. Meanwhile, for more information on securing hard money loans, go to www.RehabHardMoney.com.

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Is Transaction Funding Legal, and Pitfalls You Need to Know

In the past, one of the easiest ways of getting a check from real estate investing is through the use of simultaneous closings. This was were essentially buying a property and reselling it to another investor on the same day. Because of new state and federal policies which have made simultaneous transactions much more difficult, a program called transaction funding has taken the place to allow people to continue making money without the hassle of being subjected to scrutiny and red tape of regulations.

Questions

One of the questions that many people ask when faced with the opportunity of simultaneous closings, however, is whether transaction funding is legal, and what pitfalls are faced with these types of investments. Before you engage in any type of activity, especially those that involve money even if the money is not yours per se, it is important to understand the full legal implications before undergoing the process, in order to ensure your safety and reputation.

Legalities

One of the things that an investor must understand in these types of transactions, however, is that it is actually legal. Although there have been new requirements and procedures that the state and the federal bureaus conduct to make the transactions much more difficult than in the past, these essentially are only safety mechanisms that should not deter entrepreneurs such as you from making money and profit when faced with the opportunity. The only catch is that you cannot undertake simultaneous closings without a funding source, which makes transaction funding necessary – so that you do not undertake dry closings per se, which are essentially the bad types of deals to avoid. When you are able to show proof of funds during the transaction between buying and selling, then you have little to worry about, unless your prospective buyer walks out on you. But then again, it is your job to ensure that you have a buyer who will follow through with the deal.

Pitfalls

The other pressing question that is often asked is what the catch is behind these types of deals. Naturally, when faced with something that seems too good to be true, the initial reaction for most people is to think that it probably is. When it comes to transaction funding to be used to facilitate simultaneous closings, there are several things that you should be aware of. First is that there is no such thing as a free lunch.

Since transaction funding essentially provides you with a bridge loan to allow you to undertake a particular buy and sell transaction, you as an investor should be prepared to pay the fees that come with all types of loans. In most transaction funding programs and companies, there are commitment fees to be paid, usually along the line of 0. These vary from one company to the other, where some require annual commitment fees for people who make a living out of real estate buying and selling, while others offer commitment fees that last a lifetime.

Apart from the commitment fees, however, there are the actual fees for the particular loans themselves, depending on the amount requested. Most companies, for instance, will charge a flat fee of around ,000 for funding requests of up to 0,000. Keep in mind, however, that as the funding request increases, the loan fees also increases. Depending on the transaction funding company, you can borrow up to several million dollars, especially for investors who are dealing with bulk REOs and other major real estate investments that require larger capitals. It is up to you to decide what type of real estate business you will undertake.

The other major pitfall that you should know, however, is that tax does apply to these types of transactions, since real estate that is bought and sold within 12 months is considered to be regular income and therefore subject to the usual taxation rules. Because of this, expect your earnings to be reduced by anywhere from 40% to 50% depending on the particular taxes that apply to your particular area. With a good property that can sell at an excellent price, however, both loan fees and tax deductions can still end up with a quick buck for you.

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