Private Lending Norwalk CT

To say that the US mortgage market has changed in the last year is a huge understatement! We have seen the end of easy money financing, and it will be some time before we see sub-prime loans, no-doc loans or hard money lending in many areas. Even traditional mortgage lending will require much higher credit standards and much larger down payments for real estate investors.

So how are you going to fund your real estate deals in this new environment?

Few individuals have enough of their own cash to purchase real estate investments, and those who do, generally know better than to use their own cash in their real estate investing business.

It is a common story, though, for new real estate investors to start out with lots of cash and little experience — only to lose all their cash in the learning process. Then they have to learn how to do things the right way the second time around.

Even if you have a flush bank account, or a home equity line of credit, you'll eventually run out of money and need a consistent and dependable source of new money to buy real estate investments.

So how do you get this cash?

You can go to a bank and try to qualify for a loan — then wait to be approved. If approved, you will need to put up a 20% to 30% down payment for each and every deal, along with paying all the bank's closing cost fees. How long will your cash last doing that?

Or, you can go to a hard money lender, but they will only lend you 65% loan-to-value (LTV) and you must fund the balance with your personal funds. Not to mention, hard money lenders charge 5 to 10 points as an upfront fee. Ouch!

So what is the answer? The answer is using private lenders to fund your real estate deals. Private lending offers a consistent source of funds to purchase real estate deals that you can go back to again and again and again. In fact, the more you use, the more will become available as you develop relationships with more private lenders.

What is private lending and who are private lenders?

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 lenders come from all walks of life and may not know the first thing about the real estate business. But what they do have is extra cash or assets that they can invest in your real estate deals. These individuals are generally middle class people, who have some extra funds to lend. They can be retired business people, corporate executives, professionals such as doctors, lawyers, or business owners or even blue collar workers.

Private lenders are looking for returns substantially above the 3% to 5% they get at the bank with CD's or money markets. Most private lenders are looking for investment returns in the 9% to 15% range and secured by local rental real es...

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