Private Lending Advantages in Real Estate Investing

The current global financial meltdown has increased the importance of utilizing a private lender in your real estate investing business. Many investors in the Lehigh Valley, PA (Allentown, Bethlehem and Easton) look towards private investor lending as an economically viable option to support their real estate transactions.

Private lenders in Allentown, Bethlehem and Easton charge fewer fees than when compared to a hard money lender. Private lenders often times do not charge points whereas hard money lenders typically charge between three to six points on the total amount of money being borrowed.

Private lending has many advantages in the field of real estate development.

1) Less paper work:

This is the first advantage offered by utilizing a private money lender. The paperwork involved in such transactions is minimal. Only a few documents are involved in such transactions and there are:

• Promissory Note

• Insurance binder listing the Private Lender as the Mortgagee

• Mortgage

2) Cost-effective and Simple:

The second advantage of private money lending is its cost effectiveness and simplicity of the procedure. There are no other costs involved in the deal other than the closing fees for purchasing a property, recording fees, title insurance, hazard insurance, etc. You need to assess the value of the property before approaching private lenders. Title research of the property is essential and has to be recorded with mortgage. All these things are enough for a private lender to consider your proposal for financing.

3) Low Fees:

There are no high bank fees involved in private money lending. The cost is kept low by keeping the procedures simple. Private lending is very cheap in comparison to hard money lenders and your typical bank’s charges for such transactions.

4) Quick Approval of Loans:

Private lending is quick enough and efficient to meet critical demands of the borrowers bound by time limits. They help to carve an edge in global competition and make the investments viable.

Private Lending has also gained much importance due to many factors in commercial real estate industry. Some of the factors are:

• Decrease in availability of land for development and increase in regulatory measures have made the process more difficult.

• The speedy loan approval is necessary to maintain economic viability of the project.

• The slow processing of loans by financial institutions is further dwindled by red tape.

Many developers in Allentown, Bethlehem and Easton who need quick finance options for real estate development, can consider bridge loans offered by private lenders. Bridge loans are borrowed to buy the time required to sort out the problems of a particular transaction and meet rigorous timetables. When bridge loans approach their maturity deadline, these borrowers approach banks to refinance the loan into a conventional long term financing solution.

Private lenders in Allentown, Bethlehem and Easton usually consider factors such as project’s Loan-to-Value and the borrowers’ assets and experience. They overlook credit history and credit problems of the borrowers. However, potential foreclosure is considered important by private lenders and foreclosure or deed-in-lieu of foreclosure is usually the primary recourse that a private lender has if a borrower defaults.

Private lending is less affected by repeated market fluctuations. In fact, during times of economic turbulence in the stock market, private lending transactions are look upon in a favorable light. The lenders even consider borrower’s needs that fall outside the defined parameters for a specific transaction.