It never fails to amaze that, no matter the economic circumstances, proven real estate speculators always have a ready source of investment cash. This situation seems to hold true even when banks and other traditional lending institutions claim that the real estate market is just too volatile and they will be severely restricting their lending policies. The obvious question is, “How can this be?” The answer is far simpler than it seems as most experienced real estate investors have other sources of capital investment through private money lenders and hard money loans.

Private Money Lenders

There is a wide variety of private investors with the knowledge, experience and resources to provide loans to deserving real estate deals. In addition, these investors are not hampered by the usual restrictions that constrain traditional banks and lending institutions. The money is their own and, as such, they are in the position to make fast and binding decisions on any deal that crosses their desk.

In particular, private money lenders and the associated hard money loans have the following benefits:

Availability

There is more private capital in the U.S. than in public institutions. This capital is far more liquid and investable than any that can be found in companies with shareholders, oversight committees and narrowly focused executive boards. In short, since they are paid by the deal, private lenders are far more interested in making successful loans than their salaried, institutional competitors.

Versatility

In a similar vein, private investors can make hard money loans on deals that any banker would have to decline. Private investors are generally experienced in the business world and understand that many unconventional real estate deals can also be the most lucrative.

Affordability

Private investors, typically, do not have the same overhead and costs as traditional lending institutions. This fact translates into total loan costs that are equal to or less than a normal real estate loan even if the interest rate is somewhat higher. It is a win-win situation for the lender and for the borrower.

Hard Money Loans

The use of hard money loans provides one of the surest and most affordable ways to finance a complicated or otherwise unconventional real estate transaction. In addition, in most cases, private money lenders offer more than just capital. They can also be an invaluable source for their experience, knowledge, as well as their contacts.