Why Work With a Private Money Lender
Thursday, June 3rd, 2010Private money lenders make a living by providing loans and servicing those loans to people who need private money loans, (financing that is secured by real estate.) Private money lenders can be direct private money investors or simply brokers. Most lenders are actually brokers, placing money for private individuals. Some of these people are both direct lenders and brokers. In this case, the financial professional usually funds one or up to a few small loans per year and plays the role of a broker to those seeking funding for the rest of the incoming loans that he or she brings in.
Deciding if you want to go with a private money broker or a private money lender is much like selecting whether to buy a home with the help of a realtor or whether to work directly with the seller and bypass the professionals.
Working With A Direct Lender
The benefits of working directly with a direct private money investor are clear on the surface: it will cost you less money working with the end investor. Brokers are compensated for their time and effort by charging points on the private money loan, usually in addition to any points the end lender charges. Therefore, as you get more brokers lined up in your transaction, the more the money is going to cost you when everything is said and done.
If you have selected a end of the line, direct investor 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. There are both positives and negatives to this.
By working with the end investor directly, you can be assured that you are hearing your information and updates first hand, which may allow you to close your transaction more smoothly. This is due to the fact that no one knows your particular situation the way you do, no one can explain any odd issues better than you are able, and no one knows the benefits that the transaction will bring like you do. The down side to working directly with the investor, however, is working with the direct private money lender means that your loan either funds or it doesn’t, there are no other options if the direct lender declines your loan, except to go back to looking for another direct lender who’s perameters your loan may fit.
Why You May Want to Work With a Broker
The advantage of working with a broker is also clear: 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 loan you need at the rate and term that work for you in the least amount of time without the need for you to stress and continue to look and present your deal to investors you do now know.
Having a good broker will allow you to properly package your deal (which is very important) and send it to the correct direct private money lenders for your transaction. Working with a broker will help ensure that your transaction goes as smooth as possible, and actually gets funded.
When you get right down to it, your choice to work with a good private money broker or directly with a private hard money investor will likely depend on whether you have access to an investor directly who lends private money and whether you feel comfortable packaging and presenting your funding request directly without professional help.
