Who Needs Banks?

With the current lending atmosphere, and the tremendous opportunities in the market, investors are scrambling to get loans for bargain priced properties. The only problem is, banks won't work with us like they did a couple of years ago. Requirements have increased and the loan limits have decreased.

So what's an investor to do? The best overall answer is private lenders. There is a huge pool of people out there today who have money setting in a cd, savings account or other such temporary parking spots, because they have pulled them out of the stock market due to uncertainty. Would they love to make more than these avenues are returning to them? You bet they would and they are begging to make their money work for them, rather than being eaten up by inflation.

There are many real estate investors with great deals available but these deals need some sort of funding, whether it's short term money for a flip or closing cost on a subject to deal. There are mainly two ways that the private investors can work with the re investor, to increase their ROI. First there's the joint venture equity partner, where both parties share a percentage of the profits made on the deal. Another approach is the set a higher that average interest rate on their money, which usually averages 8% and higher, depending on the amount borrowed and risk.

One thing to keep in mind is the security that is involved for the private lender. They are included in the property insurance policy, they have title insurance, a deed of trust and the fact that these deals have at least a 65% LTV, if anything should come up.

So, there is quite an advantage to all parties involved in the transactions and a lot higher ROI than most other investment tools. Then there is the fact that if the cash comes from a self directed IRA, all profits are not taxed. This is the subject of a future blog.