Two Major Benefits Of Having Private Lenders
BATTLECALL GUEST EXPERT: Alan Cowgill,
PrivateLendingMadeEasy.com
I started my business by using banks, savings, credit cards, lines of credit,
creative techniques with sellers (like land contracts or lease/options), and
partners. But, once I was self-employed, I was concerned that it was going
to be harder to get loans to purchase
properties.
I had always been
unhappy about how long the banks take to get the job done. I had it take
4-1/2 months on a house without a furnace. The bank didn't know if they
wanted to make a loan on that kind of house, but that is what my rehab business
is all about. Buy 'em ugly, cheap and fix 'em.
Just think, if I would have used a private lender on the above deal, I could
have bought, fixed & sold the house and pocketed $20,000 by the time I got
to the closing table with the bank.
With private lenders, I have the funds available all the time. When a
good deal comes my way, I can grab it because I know the money is waiting for
me. While my competitors are scrambling around applying at the bank, I've
made an offer and closed the deal. My rehab crew is all over the property
like ants before the competition knows what happened. I love having
private lenders for my
business.
So, a major benefit
is SPEED to purchase a property.
Let's look at another major benefit of having private lenders. My first
private lender was my Mother. My Dad had passed away in 1989 and Mom had
insurance money. She proudly invested it on bank certificates of deposit
(CDs). When I became a real estate investor, I learned about finding
private lenders and so I talked to Mom about it. She loaned me $5,000 and
received 10% interest in return. I paid her monthly just like her bank did
with her CDs. She was delighted and so was
I.
As my use of private lenders
increased, I learned that some of them didn't need monthly payments and so I
started to structure my loans so there was no payment until the property is
sold.
This is a huge benefit... Think about what this has done to improve my
monthly cash flow. Now my Mom will always get monthly payments from me
because she is retired and depends on that income BUT anyone who can wait on
their money, I'll let the money accrue. So the second major benefit is
improved CASH FLOW because you don't have to make monthly mortgage payments but
just let the interest accrue.
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