Private Money Lenders: a Breakdown of Different Types

Read about different types of private money lenders.

Once you decide you want to get into real estate investing, before you start looking at properties, you want to get the financial side in order. A little research will turn up the fact that private money lenders issue most of the loans. Traditional banks don’t want to take on the risks of fixer upper properties. With private money, there is more leeway to look at the expected return on the investment.

Get Private Money to Start in Real Estate Investing

There are two types of private money lenders: individuals and companies. Individuals could be almost anybody–friends, family, or acquaintances who have money to loan and want to see a good return. The problem with these types of deals is how much personal risk there is. If a real estate deal with someone you know goes south, you lose money. But more importantly, you might lose the relationship. The other issue is that individuals may have very little experience with real estate investing. Who is there to tell whether a deal is really a good one?

In general, it’s better to go with a private money company. A company will have the experience to know whether a deal is a good one. If they don’t expect to be able to recoup their investment, they won’t lend you money. That might be a disappointment. But it’s better to avoid a bad investment than get entangled in something that becomes a money pit.

Give us a call at LendingXpress to discuss your plans for real estate investment.