Private money lenders are also called hard money lenders. This type of lender is typically individuals or groups of individuals comprised in an organization with a single goal of lending out money with predictably larger interest rates. This style of lenders also resides in more specific niches that they specialize in. For this reason and this reason alone, it can be quite difficult to locate the correct lender for your scenario. Much like searching for a specific auto part, if you don’t know the technical jargon it can be a difficult task.
Finding a private lender for your needs is not as easy as searching the web for “chattanooga hard money loan.” My best advice would be to search specifically for different guide sites that can direct you to groups of hard money lenders who are willing and looking for individual prospects to invest in. Keeping with this specific example if you were to search the Web for “chattanooga hard money loan” you would not find any individual lenders, however, you would come across several sites which group lenders together according to their affiliations as well as their specialties. Different sites may cost you money in order to view their collections of lenders, however, others are free. Before you delve too deep, remember to always research the individual sites you browse. Find out what others think about these collections of private lenders before making any final decisions.
There are many different scenarios when a person or company may seek a hard money loan. Although there are many the amplest opportunities are in real estate investment. This is also the reason that many private lenders are most comfortable in a specific niche. For instance, there is a wide variety of real estate investment scenarios. Not all lenders are comfortable in each scenario due to their specific knowledge base. For example, a lender who specializes in commercial real estate will know all the intangibles associated with that type of investment. They will not, however, know all of the ins and outs of a land ownership investment especially within a specific region of the world. Therefore a lender like that would not be willing to accept such a risk. This specificity in experience and knowledge is also a reason why individuals may seek out hard money lenders instead of a traditional lender.
One example of why someone might seek out a hard money loan is if they come across an extremely good deal on a piece of real estate that they are thinking about fix and flopping. This is a technique where someone purchases a property with the intention to fix it up to increase its value. The person will then sell for a quick profit. Opportunities like this require money fast. Also, the shorter term of lending doesn’t usually impact this type of investment since people are generally fixing it and selling it quickly. The dynamics of this type of sale are readily predictable for experienced individuals. So instead of seeking the long route of getting financing through the traditional methods people use their experience and track record to attract private lenders. If you can show a track record of success and profits then most hard money lenders will jump on board with your business plan. Most traditional money lenders don’t take things like that into account. They absolutely seek individuals with good credit and statistical success rather than track records of periodic success. There are definitely many specialized niches in the real estate market that make suitable investment opportunities for private lenders. And this is just a solitary example of why private money lenders are important and definitely worth the extra interest rates if you have a well-thought-out business plan and method of profitability.