Benefits of Using Private Lenders for Real Estate Transactions

When you decide you want to invest in real estate, you'll probably need some sort of financial support. Most people acquire this support through banks, credit unions, lines of credit and their own past investments. This is a solid way to finance your real estate business, but it is far easier if you are able to use private lenders for real estate transactions.

A private lender is an individual entity or individual other than a financial institution who supplies funding for business ventures out of pocket. Angel investors are an example of private lenders, as are wealthy parents, interested corporations and anyone else who offers to invest in your real estate business. When you use a private lender for real estate transactions, you gain quite a few benefits over more traditional methods.

Speed of Acquisition

When you find a hot property on the market that you can flip for a handsome profit, you can bet that every other real estate investor within a hundred miles has also eyed the same property. You have a limited window of time in which to make an offer and close on the home, which is why relying on banks and credit unions can be your downfall.

Even if your credit record is spotless, cutting through the red tape on the way to a loan can take forever. The application process alone can take 3-6 weeks. If you're using private lenders, however, the money is available immediately, and you can snatch properties before the competition has the time to make it to the bank.

Flexibility of Funds

People usually have a more personal relationship with private lenders than with financial institutions, which means that the available funds can often be used with more flexibility. For example, if you purchase a fixer-upper rather than a more expensive "ready-to-go" house, you can use the money from private investors to fund both the purchase of the property and the improvements necessary to sell.