If you're in the process of buying a new property, especially if you're planning to flip it, then you're faced with a difficult choice. Chances are, you'll need to borrow money from a lender, but there are so many options available, and the choice that you make can greatly affect the entire experience. One of the biggest decisions you'll make is whether to borrow from a traditional lender or a private lender. While every situation is different, you'll find that most often, a private money-lender will be a much better choice than a traditional lender, especially for a fix-and-flip property. Here's why.
Less red tape
Traditional lenders have all sorts of rules that they have to follow. For one thing, the law is much tougher on public banks. These rules are passed down to you, and often, you end up with the problems. In addition, public banks are usually huge organizations. Although you may apply for a loan at your home bank, there are 300 other branches nationwide, and the corporate office is on the other side of the country. Unfortunately, the corporate office is where they make decisions that affect whether or not you deserve a loan. This means that when you don't quite fit the regulations and policies that have been set in place, there isn't much you can do other than try another lender.
Private lenders don't work this way. First of all, the laws concerning private lenders are much looser, and allow more breathing room for you as well. Also, private lenders are usually much smaller, often one or a few branches, and they usually give much more power to their staff. Do you miss the income requirements by half of a percent? A traditional lender will apologize and send you on your way. Only want a loan for eight and a half months? The public bank will probably laugh at you. But a private lender will be happy to work something out.
In addition to being able to bend the requirements of the loan, a private lender will also be able to work with you during the loan period much more than the public bank will. If something goes wrong, a larger corporation will just send you a couple of letters and then take the property from you, and if things are going really well, they'll charge you a big fee to pay off the loan early. In both cases, a private lender is much more likely to work with you. They're not trying to run a huge corporation, they just want to get all of their money back, with a little profit, and they understand that what's good for you is also usually what's good for them.
The people who you work with when you do business with a private lender are just like you. They are much more human than those who work at the big banks. Private lenders will understand when something goes wrong. They understand that you're trying to flip a property and you only want the loan for eight or nine months. They understand when you're credit score isn't perfect, or when you finish early and have the money to pay off the loan, or the repairs take longer than you think, and you're not able to pay everything off in time. Private lenders understand your situation and will do whatever they can to work with you.
Although every situation is different, if you're in the process of buying a property to flip, you should definitely consider a private lender. These are only a few of the ways that a private lender will make the experience much easier than a traditional lender. If you'd like to learn more about the benefits of working with a private lender, contact us. We'd love to help with anything that you need.
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