Why Use Private Money For Real Estate Investing - Reason 3

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It’s been said by wiser folks than me that one of the very best things about investing in real estate is the ability to “leverage” high-value properties with very little cash. If that’s true, and I believe it is, then doesn’t it seem reasonable that if you can borrow more money, you can leverage more property? Of course it does, and using private money for real estate investing allows you to maximize your borrowing potential.

It’s all too common for real estate investors to hear the following from their mortgage loan officer: “I’m so sorry, Miss Investor, but you have too many mortgages already. We can’t approve another one for you.” This in spite of the fact that the subject property is at 65% of market value, and there’s three other investor’s in line behind you to buy it.

ARRRRRRGGGGGGHHHHHHH!!!!!

Ah, but if you had a network of lenders set up, all waiting with cash in fist to loan you private money for real estate investing, this wouldn’t be your problem, would it? No, and here’s why.

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When you use private money, the lender isn’t going to tell the credit bureau about the loan. Therefore, it’s never going to show up on your credit report, and it’s not going to be listed as one of your debts, or used to calculate your debt-to-income ratio. In fact, about the only place the loan will be noted is with your county, as security for your lender, assuming that’s the way your loan agreement reads.

Now, if and when you DO need to apply for a conventional loan or mortgage, Mr. Loan Officer will say, “Gee, Miss Investor, your credit looks as clean as a whistle. We’ll be happy to grant your loan request.”

This in spite of the fact that you may have 20, 30, 40, or even more private real estate loans, all secured by the real estate you’re making a killing on. You’re happy, your lenders are happy, your banker’s happy… so who’s not happy?

The great thing about this is, whose business is it anyway. Assuming you’re setting up everything according to the law, and you’re securing your lender’s interests with the underlying real estate, and you’re investing wisely by buying value and keeping your word, the only person who needs to know is you.

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Use your head, and keep excellent records of all your private lending for real estate relationships and transactions. Make real estate your business, not your hobby. Do these things, and your slice of the pie will grow ever larger.

Reason 3 to use private money? Maximize your borrowing potential.

Want more reasons to use private money for real estate investing? Try http://www.private-money-real-estate-investing.com/why-private-money.html.

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Now, go make more offers!

Tom Dunn is a successful real estate investor and author of the popular DealFiles Real Estate Investor Stories free newsletter. You are welcome to share this report, unedited and in it's entirety, with anyone you like. You may not remove this text. © 2007 by Tom Dunn.

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