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Real Estate Investors: The Advantages of Private Lending

By Michel Lautensack

Republish: EasyPublish™ Published: 09May2009 Word count: 419 Viewed: 252 time(s) Get Free Content For Your Site

There are many advantages to using private lending to fund your real estate investment especially during the current uncertain economic climate. If you are considering using private lending to fund your real estate transaction, here are a few simple advantages to consider.

Minimal paperwork

Private lending has a number of advantages. The paperwork is extremely minimal. There are only a few documents. In theory you could have a private lender closing with about 10 pages of documents.

- You've got your promissory note—two pages.

- You have the insurance or whatever—a couple of pages.

- You'll have your mortgage. That could be longer, but typically it doesn't really matter because the title company will be handling the mortgage anyway. Generally, it's not a particularly long document.

- It's possible you'll have a disclosure document and that's all you're going to have.

- Obviously, you may have a purchase agreement between you and the seller, but that's a different document.

Easy and Cost Effective

Private lending is extremely easy and it's extremely cost effective. Typically there is almost no cost except the cost of the insurance to do the deal. You might have to do an appraisal. You might have to do a title search, and you have to record the mortgage. All of these are things you would have done anyway with a private bank or even a hard money lender. But that's about it.

There are no huge bank fees. There are no points, at least the way I recommend to do it. We keep that process extremely thin and we keep the cost light. There will be some marketing costs or whatnot to get private lenders, but the costs to do a deal can be extremely small and very light in terms of what banks will charge you, which are enormous. Besides all their tremendous fees, points, and this and that, they seem to have a couple hundred fees.

By the time you start looking at your closing statement you can't believe all the fees. It's absolutely unbelievable what hard money lenders charge. It's egregious to see some of the fees they charge. They'll charge you legal fees to review the documents, legal fees to write the documents, points here, points there, back end fees, middle point fees—they've got all kinds of stuff. There is a lot of cost involved with hard money lenders. However, private lending tends to be very streamlined and cost-effective.

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