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What is a Private Money Lender?

The real estate investment market can be fast-moving. When looking to purchase real estate investment property, sometimes securing the best deal requires you to act fast and close quickly. When you're looking for a loan or a lender to assist you in financing your property purchase, it may not be reasonable for you to wait for a lengthy, traditional banks lending process. On top of that, if you're using funding to fix and flip a home in order to add value to the property, traditional banks might not loan you the money on a property that requires repairs.

Many veteran real estate investors use private money lenders and private money loans to purchase property and fund fix-and-flips. Private money lenders use criteria they are comfortable with when deciding whether or not to lend someone money. In most cases, a private money lender will use the value of the property to determine the loan amount and rates.

When it comes to private money lending, there is a:

  • Lender
  • Borrower
  • Real Estate Investment Property

The lender provides funding under a contract which can take the form of a promissory note. This note will define the amount of the private money loan, the interest rate, and the term-length of the loan, among other things. The lender also gets a lien against the real estate investment property which acts as security or collateral for the loan. The borrower then makes regular payments to the lender and repays the loan according to the agreed upon terms.

Private People Who Loan Money

In a typical private money lending scenario, a private individual or company will create a loan to another individual for the purchase or rehab of a real estate property. These private investors use their own private funds they've collected to loan money to real estate investors.

  1. Private Companies - Private companies that lend private money loans to real estate investors work similar to a bank or credit union, except they are not tied to any of them. For example, CIVIC Financial Services is a private company with institutional capital that loans money to real estate investors and specializes in non-owner occupied residential investment properties.
  2. Private Individuals - Private individuals that work in private money lending can be a friend, family member, or an individual that works in the industry. When it comes to private individuals, they are looking to profit from the interest knowing they would get a better return than if their money was sitting in the bank.

How to Find Private Money Lenders

When looking for private money lenders like individual people, you have to start your search within the people you know and their contacts. Social media is a great way to spread the word that you are a real estate investor in order to establish yourself as a reliable investment. From there, its asking the people you already work with like agents, title company reps, and attorneys.

In the end, networking is the biggest way to meet individuals looking to invest. If your primary or secondary circle does not know anyone, try attending events where private investors may be:

  • City real estate clubs
  • Local meetups
  • Chamber of commerce meetings
  • Real estate conferences

As for finding private companies that offer private money loans, a quick search online will bring up company institutes like CIVIC Financial Services. At CIVIC, we deliver fast and simple lending for real estate investors. You can look forward to a streamlined private money lending process and dedicated team to help you go further in your real estate investment endeavors. Whether youre looking to get a private money loan for your next investment or to rehab your latest property, we have a variety of loans that can help you on that journey. Contact us today to learn more about how we can help you.