The greatest benefit to working with private lenders for your real estate investment business is the fact that you are able to set your own terms for the funds that you borrow. However, it is important that you know which terms you should set. It is best to come up with a lending program that will offer your private lenders competitive terms, and meet the needs of your real estate investment business as well. In addition, it is important for you to also know what interest rate you plan to offer as well as if you will offer lump sum repayment or monthly payments including interest.
What You Need
You need to have in mind how long you plan for the financing term to be, your maximum LTV ratio, how you will collateralize the money, the documentation you plan to use, as well as your tracking system for outstanding loans. A substantial amount of attention must be paid to determining such factors if you expect your private lending program to be a success.
Lender loyalty is one of the greatest assets you will have as an investor in the real estate market. Loyal lenders tend to lead to profitable business relationships that can last for the long term. Loyalty comes from special treatment and satisfaction. Ensuring that you keep all of the promises that you make to your lenders is the initial step of the process. When you can, go far above and beyond all of their expectations. This will make sure that you are able to enjoy the long-term loyalty and support of your best lenders.
In addition to loyal lenders, your business team also needs to include a good attorney and accountant who will be able to make sure that all of your registration and filing requirements are taken care of properly.
Property Options Australia
Property Options Blog © 2006 – 2009
Hi Sean,
Private lenders really do seem like a real option to conventional financing from the bank. I think you really need to know what you’re doing before you sign any papers though.
As a beginner investor, I’d really want someone to check the contract over to make sure I wasn’t making a huge mistake. Again, this is a great argument for a mentor.
Fully agree Sean…overdeliver to your private lender and get return business…option two, find a new private lender, much harder. It is a good idea to look after what you have.