Obtaining Private Money Financing
By providing financing and servicing their loans, private money lenders are in the business of helping those needing private money (financing that is secured by real estate.) Private money lenders can be direct private money investors or simply brokers. Most professionals in the industry are actually brokers. There are also private money professionals who are direct lenders and brokers. In this scenario, the individual typically funds only a couple small loans, or even fractionalized shares of the loans, per year and works as a broker to those seeking funding for the bulk of the loans that he or she works on.
Deciding whether to work with a private money broker or a private money lender is much like deciding whether to purchase a home with the with the aid of a real estate professional or whether to work directly with the seller and bypass the professionals.
Benefits Of Using A Direct Private Money Lender
The upsides of working with a direct private money lender or investor are easy to see: you save money by cutting out the middle man. Brokers are paid for their time and effort through a portion of the points that are charged on a private money loan. It is for this reason, the more brokers that are in a deal, the more the cost to you will be for that money (more brokers usually equals more points).
If you have selected a private money investor directly who is a good match for your project, will be talking with and presenting your project directly to the investor, and will be getting first hand information without having a middle man between you and the money. This can be both good and bad.
By working with a direct private money investor, you can avoid any communication issues, and this may allow you to close more quickly. This is because no one knows your transaction like you do, no one else can go over any extenuating circumstances better than you can, and no one is as committed to your business and your private money loan as you are. The flip side of this, however, is working with the private money lender directly means that either your loan funds or it doesn’t, there are no other options if the private investor turns you down, except to go back to calling around for another direct lender who will fund your particular loan.
Benefits of Working With a Broker
The benefits of using a broker are also straight forward: a good, hard working, well connected broker will know and have relationships with the direct investors with whom your loan scenario will fit. Working with a good, well seasoned private money broker will allow your loan to be properly packaged, 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. Working with a broker will help you to get through the application process and get it to the best private money lenders for your scenario. Working with a private money broker will save you time and trouble in financing the transaction and be well worth the slightly higher cost.
When you get right down to it, your choice to work with a private money broker or directly with a hard private money lender depends upon whether you have a relationship with a direct private investor and whether or not you want to present your scenario directly without the aid of a professional.
