by E. Alan Cowgill
I started my business by using banks, savings, credit cards, lines of credit, creative techniques with sellers (like land contracts or lease options), and partners. But, once I was self-employed, I was concerned that it was going to be harder to get loans to purchase properties.
I started my business by using banks, savings, credit cards, lines of credit, creative techniques with sellers (like land contracts or lease options), and partners. But, once I was self-employed, I was concerned that it was going to be harder to get loans to purchase properties.
I had always been unhappy about how long the banks take to get the job done--it took 4 1/2 months on one house without a furnace. The bank didn't know if they wanted to make a loan on that kind of house, but that's what my rehab business is all about. Buy 'em ugly, cheap, and fix 'em.
Just think, if I would have used a private lender on that deal, I could have bought, fixed, and sold the house and pocketed $20,000 by the time I got to the closing table with the bank. One major benefit is SPEED to purchase a property With private lenders, I have funds available all the time. When a good deal comes my way, I can grab it because I know the money is waiting for me. While my competitors are scrambling around applying at the bank, I've made an offer and closed the deal. My rehab crew is all over the property like ants before the competition knows what happened. I love having private lenders for my business! How private money improved my monthly cash flow.
Let's look at another major benefit of having private lenders. My first private lender was my mother. My dad had passed away in 1989 and Mom had insurance money. She proudly invested it on bank certificates of deposit (CDs). When I became a real estate investor, I learned about finding private lenders, and so I talked to Mom about it. She loaned me $5,000 and received 10% interest in return. I paid her monthly just like her bank did with her CDs. She was delighted, and so was I.
As my use of private lenders increased, I learned that some of them didn't need monthly payments. I started to structure my loans, so there was no payment until the property sold. This is a huge benefit...Think about what this has done to improve my monthly cash flow. Now my mom will always get monthly payments from me because she is retired and depends on that income. BUT anyone who can wait on their money, I'll let the money accrue. So the second major benefit is improved CASH FLOW because you don't have to make monthly mortgage payments--just let the interest accrue.
Why private money?
This topic is near and dear to my heart. When I started my career, I heard about the necessity of finding private lenders. In fact I even found two. But then I stopped.
For four years I procrastinated. I didn't get it! For four years I continued to go to banks and jump through their hoops. I also used hard money lenders, but found them VERY expensive.
It wasn't until I quit my J.O.B. and found that banks wouldn't loan me money that I realized that I needed to bring private lenders into my life quickly.
When I took that step, everything changed for the better.
If you haven't decided whether or not to use private money, I'll to lay it on the line here for everyone to see.
14 advantages of using private money for your real estate
Fast--you can buy at a discount
Monthly cash flow
No credit check/doesn't show up on your report
Unlimited funds
Control, you set the rules
You can help friends, family
You get some of your profit when you buy
The ability to be flexible
You can make offers with confidence
You can structure quick, more profitable exit strategies
It saves you money
It's cheaper than a partner
You can fund the purchase of defaulted paper
It is the foundation for a very profitable brokerage business
When a deal comes along you have to move fast. Many investors have watched a deal slip through their hands while they waited for the bank to approve their loan. Once you have private money available, that won't happen to you!
You can make an offer knowing you can set a closing date. Meanwhile, your competition is wondering how you did it so quickly!
Need Private Lenders To Fund Your Deals?
About the author...
E. Alan Cowgill is a full-time real estate investor in single family and small multi-family properties in Springfield, Ohio. Since 1995, he has bought and sold hundreds of investment properties.
Alan uses private lenders--not banks--to fund his real estate purchases. By doing this, he has created his own private bank of $2,000,000 in funds. In all deals, Alan looks for win-win solutions, where the seller, the lender, and the end buyer all benefit.
He is an author, consultant, and national speaker, teaching both new and seasoned investors how to find private lenders for their own real estate business.
