Investing in real estate is the experience of a lifetime. Owning an actual piece of property gives the owner a feeling of having really accomplished something. In order to become a full-fledged real estate investor a person needs the financing backup to help them buy that property.
Why You Can’t Just Borrow From Any Bank
A lot of novices might think that they could just stroll into their local bank for a loan if they did not have the funds necessary to cover the full cost of the piece of property that they would like to buy. However, that is just not the case. There are a lot of other factors that go into the decision that a bank will make regarding lending to an individual or not for a piece of property.
Your credit score would need to be nearly immaculate to get your loan from the bank. Additionally, they will take their time dragging their feet on the loan processing time and have you waiting at least thirty to sixty days to find out if you are approved or not. That is an amount of time that some people simply do not have to sit around and wait for some bank to decide what they are going to do. They could be letting other great real estate deals walk out the door on them if they are going to wait that long for the bank to get back to them. Instead, many choose to go with a private money lender.
Borrowing A Private Money Loan
Borrowing a private money loan means knowing someone who has the financial means to actually stake you the money to buy the piece of property you have had your eyes on. Obviously, those kinds of people are not around every corner. You really have to know some of the most elite people in order to have a person who can finance this for you. In this business, it pays to know wealth people.
What the wealth individual will do is assess your credit-worthiness themselves. They will then decide how much they will lend you and at what rate of interest. If you agree to the terms, then you sign the legal documents and receive the funds necessary to purchase your piece of property.
The Kind Of Properties Most Likely To Use A Private Money Loan
In the Fullerton, California area you are likely to find many properties that a conventional lender would not lend out money on. The conventional lender is not likely to loan out money on a property that has damage to it or is in need of repairs. They view these properties as too risky to their bottom line. The same is not true for many private money lenders. The private money lenders are more interested in getting a good return on their money. They can certainly do this by investing in the right people who turn properties around.
Wise investors will look for properties that definitely need some repairs but do still have life in them. Those are the kind of places that can receive a little tender loving care and actually make for a highly profitable investment.
Having An Interested Investor
Finally, one of the best advantages to using a private money lender over a conventional one is that the private money lender has a strong vested interest in the property they put their money into. While a bank lends money out with the hope of being repaid, they are also lending to a lot of other people. They will go through all of the classic procedures to foreclose on a property on which they do not receive payment.
The bank has less passion when it comes to how they treat their borrowers. There is less room for error and the bank does not particularly care if their borrowers default or not. They will shake their money loose regardless. That is why working with an individual is a better call for a lot of people who are investing in real estate.