Working With Hard Money

By Doherty • March 4th, 2011
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By providing financing and servicing their loans, private money lenders are in the business of helping those needing  private money loans, (loans secured by real estate.) There are generally two types of private money professionals, direct lenders and brokers. Most professionals in the industry are actually brokers. Some private money lenders actually wear two hats, being both brokers and direct lenders. In this case, the individual usually funds one or up to a few small loans per year and plays the role of a broker to clients for the rest of the incoming loans that he or she brings in.

Deciding whether to go with a private money broker or a private money lender is much like selecting whether to buy real estate with the with the aid of a real estate professional or whether to write an offer directly to the seller, representing yourself in the transaction.

Benefits Of Using A Direct Private Money Lender

The upsides of working with a direct private money investor or lender are easy to see: it will be less expensive if you go directly to the source. Brokers are paid for the work they do by charging points on the loan transaction, often times in addition to the points the end investor charges. It is for this reason, the more brokers that are in a deal, the more you are likely to pay in fees (such as points) to accommodate that cost.

If you have chosen a direct private money lender who is willing to fund your particular transaction, will be talking with and presenting your project directly to the investor, and will be able to get all of your inforamtion straight from the horses mouth. This can be both good and bad.

By working with a direct private money investor, you can circumvent the mis-communication and this may allow you to close more quickly. This is because no one knows your particular situation like you do, no one can go over any odd issues better than you are able to, and no one is as committed to your business and your private money loan as you are. The flip side of this, on the other hand, is working with the direct private money investor means that either your loan funds or it doesn’t, there are no other options if the private investor declines your loan, except to go back to searching for another direct lender that happens to like your particular transaction.

Working With a Broker

The benefits of working with a broker rather than a direct investor are also pretty cut and dry: a good, honest broker who has experience and who has been in the business a while will have built relationships with the direct investors with whom your loan scenario will fit. Working with a broker will give you professional help in packaging your loan, improving the chances that you are able to obtain the funding you need at the terms you desire in the proper amount of time with minimal legwork and stress on your part.

Selecting a good, seasoned private money broker will help you to package your deal properly, which is extremely important, and get it to the best  direct private money lenders for your particular situation. This will help ensure that your transaction goes as smooth as possible, and actually gets funded.

When looking for private money, your decision to work with a seasoned broker or directly with a private hard money individual will likely depend on whether you have a relationship with a investor directly and whether you are comfortable presenting and packaging your loan request without the assistance of a professional.


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