Top 3 Reasons To Start Investing With Private Lenders

Enjoy this week’s podcast episode about why you should stop using banks for your real estate investments

In this week’s Investor Success Podcast we discuss:

Why you want to finance privately vs. the banks
How to create your own bank investing with retirement accounts (self-directed IRAs)
How to start networking to grow your private lender base
Positioning yourself to begin to attract money for your deals
Why you want to eliminate your hard money lender and make money more on your next flip

Stop Using Banks For Real Estate

Most real estate investors struggle growing their investment businesses due to lack of easy financing. If you have great credit and cash for your 20% down payments and the ability to be Fannie Mae compliant or get a VA loan below 4% interest then I do encourage you to consider locking in some financing with 30 year fixed rates at ultra-low rates.

However, if you are like so many real estate investors buying houses you won’t be Fannie Mae compliant so now what do you do? You could go the next route and hook up with a local Regional bank on some portfolio loans for rentals or be like everyone else and provide your hard money lender with 15% interest and 5 points on your flips.

To be successful as an investor you need more then just the skills to rehab houses. Instead you need the skills to rehab your financing to properly manage debt, maximize returns and manage your over-all risks!

Here are the 3 reasons why you should eliminate banks A.S.A.P. and start using private lenders:

1. You’ll Never Run Out of Money

Investing is capital intensive and the way you finance and manage debt is critical. You can buy houses as cheap as cars in some markets in Indiana, Mississippi, Tennessee and these purchases create great cash flow, but that is still a lot of money if you are paying cash or having to make 20% down payments to get bank financing. There are also great flipping markets across the country this year, but it takes a lot of capital to purchase and then rehab a house!

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It is imperative to learn to use other people’s money (OPM) to ensure your success in real estate. Otherwise, you will eventually run out of funds.

When you fire your bank, you will find that you do not need to make a down payment or even pay for your closing costs.

As a real estate investor, your returns will be infinite if you do not have any of your own money in the deal. An infinite return is a great goal for your next transaction and will allow you to continue buying more properties without running out of funds.

2. You Can Close Your Deals Much Faster

Purchasing houses that are in distress situations often require a very fast closing. If you are relying on bank financing, you will find the process to be full of hurdles that continue to slow down your closings. These hurdles come in the shape of credit applications, loads of personal financial documentation, rent rolls and leases for other properties you own, credit reports, and appraisals.

Each of these hurdles represents an opportunity for delays in closing. When you are buying distressed real estate you must be able to close on time and without hassles. Each of these bank-financing hurdles can lead to a lost transaction.

When you use private financing, you avoid most of these standard delays and hassles.

3. No One to Say “No”

Today’s mortgage regulations have led to increased underwriting guidelines that can become problematic for many investors. Each underwriting requirement can lead to a bank saying “no” to funding your real estate deal.

This also strips away all investor privacy as they verify every asset, lease and details of all properties you own. Do you really want to give anyone the ability to see your complete portfolio and give up the element of privacy? Carefully consider the risk associated as you begin to accumulate a full portfolio of cash flowing rentals.

Another big reason to consider not using banks is the personal guarantee. Would you give anyone a blank, signed check that they can write the date onto and then go to the bank and cash? That is exactly what a personal guarantee gives to your bank in the event that you default on a loan it puts all of your other assets at risk and also part of the reason they want to carefully review all of your assets!

How many houses would you like to buy this year if you did not need any of your own money and did not need to be concerned with getting a bank mortgage?

When you eliminate bank financing from your investing strategies, you will be liberated to buy as many houses as you want without using any of your own money. Freedom to buy as many houses as you want and that will help set you free to grow your investing business this year.

I hope you’re wondering how to begin to purchase homes without a bank, because this blog series will answer your questions and take you through the process of finding and using private lenders. Stay tuned for more!