How High ROI Ignited Investor’s Private Lending Career
Traditional banks are still somewhat reluctant to lend on real estate investments and the funding process can limp along for over five weeks. But good opportunities don’t wait for lending underwriters. That’s where private money lenders come in. By showing the private money lender sufficient equity in the subject property the investor can qualify for hard money without having to document the ability to repay the mortgage.
What follows is how private money was first explained to Scott FladHammer by a friend and real estate broker who needed funding for a real estate deal, and why Scott continues to lend money to investors and business owners: Private mortgages are the secret way some investors achieve a high yield on their money and are still ‘investing’ in real estate; learning the market and being around deals and those that do them.
private money mortgage- term referring to non-institutional residential and commercial mortgage which is typically funded by private parties who are given a security interest in the property as collateral.
WHY HARD IS EASY
While hard money is actually easier to get then a conventional mortgage, the term hard in hard money comes from being lent on a hard asset verses a person’s credit score or ability to repay. Since both a person’s credit score or ability to repay can and do fluctuate, and can change quickly, they are not considered as secure as an income for example.
FAST FRIENDLY FUNDING
Unlike a normal bank, a private money lender will likely be an individual with using his own money to fund the deal. This means an investor can speak directly to the decision-maker to negotiate financing. A private money lender can also often turn around a deal from assessment to closing in half of the time of a banker.
While the higher interest rate of a hard money mortgage may not be acceptable to all investors, many understand the rates are the price to pay for the speed, convenience and other benefits, like the personal relationship and attention which is characteristic of private money transactions.
THE VELOCITY OF MONEY
The deals with the fattest profits don’t come along on a routine basis. And while you’re waiting your money is sitting stagnant earning a zero rate of return. So when prospective deals are not working out, wise, strategic investors keep their money working for them in other ways.
As Scott FladHammer explains, “The Velocity Of Money took me three seminars, the same seminar three times to understand. The concept blew my mind and changed the way I thought about money to this day. In part, the concept deals with the fact that home equity earns a zero rate of return. Investors and home owners, especially home owners, are lulled into the idea that having property paid off, free and clear, is a good thing- the correct financial decision akin to cutting up your credit cards. For the financially illiterate yes, chop up your credit cards, leave your equity in your house and put locks on your bank accounts like a parent locks up the cupboards and stairs to protect their toddler so you don’t binge-buy.”
FladHammer continues, “For the financially wise allowing your hard earned equity to remain trapped is a foolish thing. Equity and credit are an asset to be wisely used, not stuffed under a mattress. Why would you park your money in any vehicle that does not even keep up with the cost of inflation while getting nothing back from it other than a false sense of security. Even your cheapest bank gives you free checking services for parking your money with them.”
Pay Attention or Pay Dearly
An interesting and informative real estate transaction that can help beginners and pro investors alike. See how Scott FladHammer’s early start in creative lending augmented his investing and how you can became a private hard money lender to increase profits for higher rates of returns in this exclusive Real Estate Case Study and:
- Hear what Scott says when lending to investors
- How to do more ‘easy’ deals while waiting on killer deals
- The finance tools Scott used to start and still recommends
- Detailed Steps to earn an annualized return of 47% by becoming the bank
Beginner to Advanced
Desire to make your money work for you
Enthusiasm for learning a new area of real estate
Don’t jump into lending without training
Fundamental knowledge of math
Log in to Start Your Private Money Lending Adventure
RELATED: For more on maximizing R.O.I. see the training Jeff Vaughan did called Detailed Steps to Determine Investment Property ROI here
Have an idea for a business or real estate case study? If we use it we’ll send you a gift card. Send your idea
Membership Has Its Advantages
Connect with a caring, local community, get area-specific training courses and meet the top real estate talent in Fort Wayne... all in one place. See even more advantages »