What is Private Lending

This is a start of a series of articles that I will answer a question I receive all the time... “How Does Private Lending Work”.

What is Private Lending?

Private lending involves individuals, rather than institutions, providing loans. It serves as an alternative to traditional bank financing, especially useful for real estate investors looking to buy, renovate, and refinance properties.

Traditional banks often require lengthy applications and appraisals, and they prefer properties that are already in good condition.

Why Use Private Lending?

• Speed and Flexibility: Private lenders can offer quicker access to funds without the extensive paperwork required by banks.
• Scaling Investments: Investors can scale their operations beyond their personal funds.
• Higher Returns for Lenders: Private lenders seek higher returns (7-10%) compared to typical bank interest rates (2-3%). They prefer safer investments, like real estate, over volatile stock markets.

Types of Financing:

• Traditional Bank Loans: Require extensive documentation, appraisals, and are suitable for properties in good condition.
• Asset-Based Lending: Less documentation but requires a proven track record.
• Private Lending: Offers the most flexibility and is ideal for real estate investors.

Private lenders can be found within your network, including friends, family, and acquaintances. We'll dive deeper into finding and working with private lenders in future articles.

For more detailed explanations and answers to your questions please see this video.