What Role does Private Money Plays in Flipping Houses?
Apart from portfolio rental home loans and lines of credit, private lending can be great for quickly closing a deal. Flipping using this method, you need to set cash aside for repairs and other expenses. Sometimes, the investors do not lend 100 percent of the payment and you have to pitch in.
For example, if a house has a price of $100,000 and your investor pays 70 percent, then you will have to arrange the remaining 30,000 dollars and still have money for repairs. Private money may have higher financing costs but the time savings more than makes up for a good investment situation.
Foreclosures are another area where private lending beats conventional commercial real estate loans. In auctions, you have to arrange substantial cash within hours of winning the bid.
Most banks and lenders do not offer this quick cash. Private money lenders can quickly arrange for rental home loans and at the same time offer better terms as well. So, if the property is really worth it, it is the private lenders that get more marks owing to their speed and terms to finance an investment property.
How to Find Private Money Lenders?
Being more social can be of great help if you are looking for a rich private investor. Go through your contacts and discover people with the potential to invest. Better still, look for public records like Deed of Trust where you can know who finances flipping homes or gives rental home loans. Check out what loans are currently against property in your area. Social media groups are another good source to find meetups to find your down payment money from a private lender and could well lead to great partnerships in future deals.
How to Convince Lenders to Lend you Money
When asking for money for your rental home portfolio or flipping, you need to stress the advantages of lending you money. Understand the perspective of the investor before you approach them. Here is why an investor will lend you money for flipping the house:
- Lender can avail higher rate of interest compared to CDs, bonds and other commercial money markets.
- Lending amount is secured against the property whereas in stocks there is no collateral. In case the borrower defaults, the property can be foreclosed to redeem the amount.
- The real returns on the rental home loans are more predictable.
- The right flipper can deliver much higher returns on investment.
- The value of the property can increase over time and deliver higher returns.
In private money lending, the investor has to be made sure the money is in safe hands. Carry the deal forward with the right documentation to ensure credibility. There's so much more at stake here compared to traditional rental home loans.
Just as your private lender will want to make sure their money is in safe hands, be sure your private lender is vetted the best you can and make sure your agreements are reviewed by an attorney who specializes in real estate deals.
Discovering the right private lender is not easy. Conversely, an experienced flipper can make be a gold mine for the lender. Let the lender know that you have what it takes to flip the house successfully and deliver a great return on the deal.
Rental Home Financing - Your Hard Money Lender
Have your private money ready for your down payment and ready to speak to a hard money lender? Apply online today for a fast hard money loan.