Growing a real estate portfolio can be challenging for the average investor. You need a steady flow of private money to support your deals, which often comes as loans. Unfortunately, this type of money isn’t easy to come by. Not only are conventional financing options cumbersome and lengthy, but they can also hinder your progress.
This is where private money loans come to the rescue.
Private money loans, in simple terms, are when individuals lend their private money to other individuals while securing the loan with a mortgage against real estate, and these have come to be a reliable alternative to conventional loans. On that note, here are four advantages of private money loans.
1. You can use real estate as collateral.
Unlike conventional money banks, many private money lenders don’t require a lot of paperwork, and even better, you can use an investment property that you already own as collateral. This means that if you default, the private money lenders will seize your property.
Let’s say you own a three-bedroom home but ideally, you’re after a four-bedroom authentic log cabin home. You’ve probably already been eyeing a few log homes in NC for purchasing. These homes offer lots of amenities like an additional bedroom, full bathroom with hot tub, back porch, car garage, and cathedral ceiling. Other desirable features include; beautiful landscaping, a spacious dining area, a driveway, a chef’s kitchen with granite counters, a gas fireplace, a master suite, a front porch, a large deck, and huge windows for loads of sunlight. Tempting, isn’t it?
Ideally, you will want to invest in this home, but you’re cash-strapped. Going to a bank to get a loan will be time-wasting and cumbersome. However, with a private money fund, you can use the three-bedroom apartment to get the new log home.
2. Expect good returns within a short period.
As a small business owner looking to expand your business, conventional loan processes can be cumbersome. This could take weeks to process, thereby robbing you of great business opportunities because you don’t have the funds to handle them. Private money lenders understand this pain point, which is why they are a faster alternative to banks.
Furthermore, getting a private money loan allows business to expand their businesses and make higher returns within a short period, unlike conventional financing options. Besides, the time taken for repayment is flexible. So, borrowers can choose to keep it short, as in short-term loans.
Here’s a practical example. Let’s assume you currently produce 5-gallon bottles of water but have noticed a new market within your area. So now, you’re looking to expand your business to new great-tasting beverages and include water delivery as part of your services. A private money loan can help provide the funds you need to make this expansion and meet the growing demand while you repay later with profits from the business.
3. You’ll have more flexible loan terms.
When it comes to accessing money from conventional banks, it’s a one size fits all approach. They don’t care if this your first time or not, neither do they attempt to tailor loans to meet your specific needs. This makes their process cumbersome compared to private money loans like Pacific Private Money Inc., which Mark Hanf runs.
Pacific Private Money fund is a hard money lending company. Like many other private money lenders, they provide businesses and individuals with easy access to funds by recognizing that each lender is different. As such, they have flexible loan terms and require less documentation than traditional banks.
The advantage of private money lenders here is that you don’t have to recount everything about your financial life, and you can choose a repayment plan that works for you.
4. Offers more transparency.
Getting a loan with banks is never as straightforward as it seems. The buyer has to be on alert for hidden charges that are slipped in between the agreement lines. Unfortunately, not everyone has a keen eye for details, and many will only realize these hidden charges after they have started making repaying the loan.
However, with private money loans, there’s transparency from the start to the end. The interest rates, cost fees, and default fees are made clear. The lenders ensure that there are no underlying charges. Besides, these private money lenders have a better connection with their customers as they fund local projects and are interested in seeing the success of a business or property.
Finance is a hassle to continues to plague many businesses and individuals alike. Fortunately, unlike banks that aren’t doing much to help their customers, private lending loans offer immediate funding, fewer document requirements, and flexible repayment terms that enable their customers not to lose valuable opportunities. So, next time you’re cash-strapped and in need of a quick financing option, a private money loan is your best bet.