Private Funding

Types of Financing

Private Funding

 

private funding

Seattle Business Capital can assist you in funding your real estate transaction.

Seattle Business Capital can help you become a successful Private Funding Lender.

 $ Deal + Money = Investment $

 What is a Private Money Lender?

Definition: A private money lender is a non-institutional (non-bank) individual or company that loans money, generally secured by a note and deed of trust, for the purpose of funding a real estate transaction. Private money lenders are generally considered more relationship-based than hard money lenders.

 Why Private Money Lenders?

One of the biggest mistakes that real estate investors make is that they spend an inordinate amount of time learning about finding and typing up deals but a small amount of time on how to raise equity capital from private money lenders. It’s just as important, if not more important, for real estate investors to understand the ins and outs of raising money as finding the deal. Finding a deal is great but if you do not have earnest money to tie up a deal or funds to purchase it, then all that time and effort is for nothing. When you make an offer on a piece of property, it is expected, and usually required, that you place an earnest money deposit down with your offer. Hence if you work on raising capital from private money lenders while locking up deals then you will have a greater chance for investment success.

Here are some details of a Privately Funded transaction:

  1. Investor money is secured by a lien on the property that the owner is buying, and the property is their fall back in case of default: their money security is physical and cannot evaporate like in a stock market loss.
  2. The owner is typically buying the property at a discount versus the market, so the private lender has an equity buffer that allows them to return at least their private money in case of liquidation of the property.
    • The owner agrees with the private lender to a mutual beneficial interest rate and term of the note for the borrowed funds.
    • The owner adds the name of the private lender to the property insurance so the private money lender gets his money back from the insurance company in case of a natural disaster or fire hazard.
    • The title of the property is encumbered with the lien of the private money lender, so the owner cannot sell or refinance their property without paying off the agreed upon money back to the private money lender.
    • The terms of the loan are very flexible: it is really what both parties agree to fund the real estate deal, and since it is between 2 people usually, it is fast (as opposed to a normal 30-45 days bank loan) and does not require all the red tape and many documents a bank would require you to present in order for them to consider your loan or even approve it.
    • The closing happens in a title company as usual, with title insurance or without as required by both parties, so you have a professional closing just like any real estate mortgage transaction. That protects both parties as per their requirements to the title company.

So you can see that there is plenty of benefits to actually using private money funding for real estate transactions.

Seattle Business Capital has a database of Private Funding Lenders to fund your transactions.

Seattle Business Capital is acquiring additional Private Lenders to add to their existing portfolio.

Whether you are seeking Funding for your real estate transaction, or considering becoming a Private Lender, Seattle Business Capital has a program for you. Please contact us for more information.

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