October 7, 2022

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Using Private Money Lending for Real Estate Investments

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Private money lending is a quick method for financing or refinancing any real estate investment, specifically if you don’t appreciate conventional funding or don’t have enough time to go through several hoops like a bank or another conventional lender. It is also possible that a commercial or Institutional lender would reject the money lending offers. In this case, you get the loan through other options such as  commercial mortgage lenders in Florida, which is also very popular among many Bridgewell capital hard money lender.

It’s being said and many people are unaware of what private money lending is. Even they are unsure when they can use private lending in real estate. That is why we have put this article to explain what you should know about this type of lending.

 

What is meant by Private money lending?

Private money lending is a short-term loan used to buy or refinance real estate. It is mainly utilized for the acquisition of real estate investment. The loans are offered by private lenders, as against traditional financial institutions, for example, banks or credit unions. Unlike the conventional players, private loans are less burdened by regulations and red tape, making it easier to access finance quicker & more straightforward.

The loan term generally runs for approx. 12 months. However, the lender may extend the loan term from 2 to 5 years. The amount that a borrower gets with private money loan is based on the worth of the real estate in question. The property may be the one the borrower already owns or the one the borrower is finding to purchase.

 

When is the Right time to use this type of loan?

Hard money lending can be very useful if you don’t have the equity to get a real estate investment opportunity. These loans can also be a good substitute for traditional property lending, as acquiring finance through conventional routes takes time & there are several hurdles along the way. Private money lending can fall under several different groups, which are utilized for various purposes, such as:

  • Bridge loans
  • Fix & flip loans
  • Construction loans
  • Rental loans
  • Cash-out refinance loans

 

Is Private Money Lending a Good Option?

Private money loans offer quick access to financing or refinance for real estate investment options in a market condition where speed is everything. Before you approach these loans, it’s worth discussing their advantages:

  • Suitable option for novice real estate investors: Private money lending is a fabulous option for those who are a novice in the real estate investment world & want a loan for this objective.
  • Asset-based loans: the lender puts the most weight on real estate when determining if & how much to give. The borrower’s capability to repay the loan does play an important role, but the priority is the asset, not the borrower.
  • Simple to leverage: t is not a smart move to leverage all your money on a single property. With private money lending, you can leverage your money to purchase 2-5 properties & enjoy various sources of income.
  • The speed: Private lending is faster. This quality restricts the possibility of losing investment opportunities & gives you a start on your possible fix & flip project. The local location also matters to get the loans faster; for example, if you have approached a local hard money lender Augusta ga, your chances of getting a loan improve exponentially; private money lending in Augusta could depend on finding a lender familiar with the neighborhood. Therefore, a short distance between the private lender & the property increases the loan approval chances & speeds up the funding process.
  • Zero prepayment penalty: Another benefit of private money lending is the zero prepayment penalty. You would be able to pay back the loan as soon as possible without being penalized.