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Real Estate Investors: Why Private Money is the #1 Option for Financing Your Investments

There are so many misunderstandings related with private money lending for real estate investors. In fact, most real estate investor do not understand or participate in private money because they do not understand what it is or how to get started. There is a long a history of private money lenders investing their own money in real estate investments. Like many things, private money comes and goes depending largely on interest rates and the demand from real estate investors and other investors.

Traditional lenders always gave loans based on two things: collateral and your personal pledge to repay. Lenders wanted to lend to about 70% to 80% of the assets values (collateral) and wanted you to be trust worthy based that on your credit score and salary.  Private money is different in that the loan is almost entirely based on the collateral and not your personal pledge to repay. This does not mean private lenders do not do some background checking and if you have a history of not repaying things it is unlikely you will be participating in the private lender market.

The definition of a private lender is an individual that you can negotiate directly with on a personal basis to borrow money for real estate investments. The money can be used to purchase rental real estate investments or to supplement funds borrowed from a bank to cover down payments.

Private money became very popular as interest rates on tradition Money Markets and CD's dropped below 5%.  Entrepreneurs and other people with extra cash started looking for higher interest rates (north of 12%). If they could get the high interest rate and enough security (collateral) they were willing to do loans without personal credit or the need to be worried about credit scores. That started the revolution that you see today where private money lenders are as big and popular as hard money lenders were 10 years ago.

This trend toward private money will remain as long as traditional interest remain low and traditional mortgage and hard money remains hard to get.

Finding private money is not nearly as difficult as people think. We utilize a number of low key person to person marketing techniques to attract potential lenders. However, I strongly urge you not to use any large public sources of advertising, such as Craig's List, or you may get a call from the SEC and you do not want that.

Here’s how it works …first, you do some simple marketing to find individuals interested in earning 9% to 15% interest on investments secured by local real estate. You will find these prospects everywhere. They belong to your local real estate investor clubs, church’s, civic clubs, parent organizations, friends, family or even neighbors.

You will be surprised how easy you’ll locate them and soon, they will be searching you out. Just let everyone know that you pay high rates of interest for loans that are secured by local real estate.

As prospects express interest, you explain that the investments are secured by local real estate and do not exceed 75% of the after repair value of each home. Each investment is based on a specific property, and they can decline any property which they are not comfortable with. All you require is that they approve quickly and can fund within 7 to 10 days.

I invite you to learn more about Private Money and become a member of our FREE weekly tele-seminar class where we teach tips and strategy on how to grow your real estate investing business and how to raise Private Money by going to http://www.realestatewealthtoday.com/TuesdayTipsSignUp.html.

Mike Lautensack is a full-time real estate entrepreneur, coach and mentor in Philadelphia, PA and creator of the Private Lending Presentation Kit. This powerful done-for-you kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your real estate business. To learn more about this kit and receive your FREE eBook go to Real Estate Investing Blog.


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: no positions