Over time you'll find it much more profitable to stop applying for conventional institutional loans. You'll go a lot farther, faster if you try to borrow from private investors who understand your problems rather than banks. This might require a shift in your thinking. Who owns the money that you've been borrowing? In the vast majority of cases, it won't be the agency who lends it to you. Instead capital is owned by investors who buy bonds, open accounts in banks, stock brokerages, thrift institutions, IRA's, credit unions, etc,
By locating a few of these people and offering them a better deal than that offered by institutions into which they've been depositing funds, you will have access to financing that is far superior to those nosy and gossipy institutional credit sources which you have been accustomed to using.
Why is private financing more valuable to you than institutional? There are myriad reasons which relate to availability of money at times when institutions won't lend it for investment. Remember, the institutional lenders are in a regulated industry. Their decisions are pretty much limited because they are using someone else's money, not their own. They can only lend on certain kinds of property within fairly limited geographic areas. They are relatively inflexible when it comes to repayment terms, the security they will accept, and the speed with which they can react to a special situation.
In contrast, the private lender is not regulated. Because he is lending his own money, he can withdraw it from the very bank who might turn down your request. He is probably not going to charge loan closing costs or points. He can make a decision to grant the loan in just a few moments, and also make the loan based more upon your demonstrated character than on the precise appraised value of collateral you might offer.
Your private sources will be available year after year and won't be prone to “transfer” like bank officers. In many instances you'll be able to secure better terms, and establish long term credit relationships that won't appear in your credit file. If you get into a tight spot, in circumstances in which bankers would foreclose, private lenders tend to work with you, or to transfer debt into equity in the property. Your private lender won't have weekend and holiday closings, and he's “open” at night. Don't overlook him.
Certainly it is much more difficult to round up credit from private investors than from institutional sources, particularly when it comes to big dollars; but it is also certainly worth all the trouble. Why?
Few private lenders are plugged into a computer system that would share your financial information with the world. Thus, there is a lot less chance that you'll fall victim to someone on the prowl for assets to grab through a law suit or levy. And virtually no chance that an error concerning your credit performance will be entered into some computer system.
Quick access to private investor money will make it much easier to do more deals… faster. There's more flexibility too. They can become equity partners in the deal instead of getting interest.
With Jack Miller's new CASH FLOW CONCEPTS manual, you'll learn how to find private investors who will lend you all the money you need for your real estate business
