A private money lender is a person who uses their capital to finance investments, such as real estate, to profit from the interest paid on a loan. They are not affiliated or linked with a bank or other financial institutions, only interacting directly with the borrowers.
Private lenders are an uncommon source of investment. Still, they seem to be a valuable asset to investors because they require different approval requirements than established financial institutions. They also implore a faster pace in processing the requests.
Investors can benefit from private lenders in two ways: by refinancing a property or when buying a new property. Although the right financing varies on a deal-by-deal basis, it’s crucial to know that these options are available to people needing a budget to invest.
Steps in Finding a Private Money Lender
Finding the best private money lender according to a borrower’s needs and preferences isn’t tricky. However, it does require various documents and a comprehensive connection to discover the best lenders in the industry. Although there are many investors in the market, finding one willing to fund your investment is challenging.
1. Be Familiar with the Loan
Since private money lenders are not associated with any financial institution, it’s best to understand their terms as it will be crucial to the money a borrower will owe. First-time investors should provide information that best convinces lenders that you are trustworthy to lend their money to and not have doubts about it.
2. Create a Professional Circle
Private lenders are all about building relationships. The best way to get approved quicker is by developing a solid investor network. By getting along with people with high credibilities, such as real estate agents, fellow investors, title companies, lawyers, and private investors, you’re only proving you are worth more.
3. Gather Necessary Documents
Although private money lenders are not associated with financial institutions, they would still require some documentation to cover your education, goals, past deals, experiences, or anything that proves you’re the right investor for their funds.
To make it easier, prepare a presentation that outlines the properties you have worked on in the past. The presentation should include previous deals, pictures, statistics, and relevant information that pushes your agenda forward. However, remember to keep it clear and concise. Providing all necessary information should prepare you for any questions that may come your way during the pitch.
4. Choose Your Private Lender
Discovering the best private lender is challenging. However, it’s best to pitch or apply to the investors that best suit your needs or preferences. Make sure to be in touch with an investor that will serve your needs, not just the other way around.
Next, ask them about their loan terms and interest rates where they will base the loan. By asking relevant questions, you’ll understand and know how long you’ll have to pay the loan back and how quickly it accrues interest. Of course, don’t forget about the potential penalty fees tied with the deal. Lastly, find out when the lender will disperse the funds to you.
5. Present the Pitch
Once you find the best private lender for you, it’s time to make a pitch. Try to be as educational as possible because it helps build rapport. Your goal is to create a great first impression and slowly build up from there. By the time you’ve answered the questions thrown at you, you can be more at ease and hope to secure private financing sooner than later.
Private money lenders are better for investors as they require less strict requirements while providing at-par deals with financial institutions. For people wanting to invest in properties or real estate, borrowing from a private lender may be an intelligent choice to make.
DFW Investor Lending believes in the power of hard money lenders in Dallas. Through private money lenders, people can save thousands of dollars in their next deal. Allow our appraisers to be your lender and receive rates for as low as 11.99 percent. Visit our website to learn more.