When it comes to investing in real estate, whether you are a flipper or in it for the long haul, one of the most critical aspects you have to think about is money—funding.
Real estate investing is not unlike any other business venture. Capital is always at the heart of it, and it can make or break a business.
But what is lost on many real estate investors is that you don’t have to dip into your own pocket to finance a real estate deal.
There are several strategies you can employ to raise funds to finance a deal, and one of those is private lending.
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
Understanding Private Lending
Borrowing from conventional lenders has a lot of red tape involved, which can be daunting even for the most optimistic. Now, imagine being a fix-and-flipper where you have to dash to the bank or credit union for financing every time you come across a good deal.
Not at all, feasible, is it?
If your credit is damaged, your options become even thinner.
Enter private lending.
Private money lenders are basically individuals or investors who lend money to real estate investors to purchase, refinance, or renovate a property.
Related: The Private Loan Source Perfect for Growing Your Real Estate Portfolio
They are non-institutional lenders who are not subject to any regulation and fall into three categories:
- The primary circle: This comprises family and friends.
- The secondary circle: This circle is made up of those immediately outside your social circle. Think colleagues, professional acquaintances, and personal acquaintances.
- Third-party circle: These are lenders furthest away from a borrower with regard to relationship. They include hard money lenders and accredited investors.
Hard Money Lenders
When people talk about private lending, mostly they are referring…