$4000 A Month Is How Much A Year latest 2023

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Why Use Private Money For Real Estate Investing?

There are many reasons why a real estate investor might want immediate access to private money to invest in real estate. This article will explore some of these reasons.

The number one reason to use private money to invest in real estate is to protect your credit rating. Think about it…if you borrow money from an individual rather than a bank or lending institution, the loan will never be reported to the credit bureau. This will not count towards your debt ratio and no payment history will be kept. No one will ever know about this loan unless you tell them.

Next, and one of the best reasons to use private money to invest in real estate, is the elimination of paperwork. I have never had to fill out a loan application for private money to invest in real estate. The lenders I work with all know me and the type of investment I make. Many of them don’t even care to see the property. When I apply for a mortgage, on the other hand, the application process itself can take several days and there are mountains of paper.

Another reason to use private money to invest in real estate is the easy access to quick cash. Sometimes, when a deal is particularly good, it is necessary to go very quickly. With bank financing, this kind of speed is often impossible. Even lines of credit don’t always give you the same speed as private lenders. With just one phone call to one of my private lenders, I can close a deal that other investors only dream of.

A great reason to use private money to invest in real estate is the leverage it gives you. Think about it… if you have $50,000 of your own money, is it better to pay it all in cash for a $50,000 property, or put $50,000 in cash on a $500,000 property and use private lenders to fund the rest?

If you answered $500,000 property, you’re right, and here’s why. Let’s say the $50,000 property rents for $500 per month, or $6,000 per year. Your return on investment (ROI) would be 12% in the first year ($6,000 divided by $50,000). It is safe to assume that the rent for the $500,000 property could be around 10 times that of the 50 $000, or about $60,000 for the year If your repayment to your lender is $4,000 per month, or $48,000 per year, what is your return on investment (ROI) for the property of $500,000? If you answered 24%, give yourself a gold star!

Of course, you’ll have to factor in the cost of borrowing money, but even after that, you can see there really is no comparison. Using private money to invest in real estate gives you what is called leverage. Leverage is the ability to move something very large with something very small…a lever. The leverage, in this case, is your small amount of money ($50,000). With it, you can “move” or control a $500,000 property, as the money from the private lender increases your “leverage.”

Here I have given you some of the many good reasons to use private money to invest in real estate. There are more, but you should have a clear idea of ​​why private money can be so useful in your real estate investing toolkit. If you want more information, I wrote another article on my website called Private money for real estate investment.

Now go make more offers!

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