Become a Shreveport Bossier City Private Money Lender

Private lending can be a great way to earn passive income from real estate without the hassle and risk of owning rental properties. To become a Shreveport bossier city private money lender you must first take notes of the following content.

Summary

Private money loans are given to individuals or companies by a private organization or individual instead of a bank or other financial institution.

Shreveport Bossier City private money lender must be diligent and discerning when offering private money to borrowers.

Risks exist for both borrowers and lenders with private money loans. The risk is out there and even as we buy houses in Shreveport bossier city we know that without good lenders this wouldn’t be possible.

What is a Private Money Loan?

A private money loan is usually a short-term loan used to purchase or refinance real estate. It’s primarily used for real estate investment acquisitions.

The loans are provided by private lenders, as opposed to traditional financial institutions such as banks or credit unions. Unlike these traditional players, private money lenders are far less burdened by red tape and regulations, which makes accessing finance quicker and more straightforward.

The terms usually run for around 12 months. Although, the loan term can be extended from 2-5 years. The amount that a borrower can get using a private money loan is of course based on the value of the property in question. The property may be one the borrower already owns or it may be the property the borrower is looking to purchase.

I have personally partnered with private lenders on 100’s of real estate deals. The vast majority of our current portfolio was acquired using private money loans. This funding model works well for me, my Shreveport bossier city private money lender, and the tenants/buyers who live in our homes.

I don’t claim to be an expert on private lending, but I do have some mileage and battle scars that hopefully you can benefit from.

Shreveport Bossier City Private Money Lender

The mitigation of risk is paramount for a private lender because the goal is to make money. There are several factors that a private lender focuses on before offering a borrower a loan. Among the most important are:

Borrower Credit – A borrower’s credit score reveals how quickly and consistently the borrower has historically paid off his debts
Pricing Strategy – How can the lender ensure that the cost (to the borrower) of the loan is competitive with other lenders
Exit Strategy – The schedule for the borrower to settle the loan and how they plan to do it

It’s also wise for the lender to perform due diligence, verifying any information provided by the borrower to get the loan.

Individual Private Lenders

The second big type of private lender is an individual. Individual Shreveport bossier city private money lender can be investors who are looking to earn money through the interest borrowers pay on loans.

This may get them a better return than leaving their money in the bank would. Individual private lenders can also just be people the borrower knows who are willing to help out with funding and may not be as keen to make a profit.

Are Private Lenders Legal?

It’s perfectly legal for organizations other than banks and credit unions to lend money. However, private lenders still have to comply with the usury laws and banking laws of the states in which they operate.

In other words, the rates that they’re able to charge are regulated. Plus, depending on the state, a private lender might only be able to lend a certain amount without having a banking license.

Regulation of Private Money Loans

All Shreveport bossier city private money lender must follow federal and state usury laws, and they can be subjected to banking regulations as well. Still, not all routine regulations apply to private lenders and the loans they offer.

One of the most frustrating regulations for private money lenders is the fact that lenders are sometimes subject to limits on how many loans they can hand out if they lack a banking license.

Most private lenders don’t need such a license because they aren’t a bank or some other type of financial or lending institution. Some states have established limits on the number of loans a lender can offer before they are required to get a banking license.

10 Reasons to Consider Lending Private Money

Private lending isn’t for everyone. Like any investment, there are risks, and it is certainly not impossible to lose money. That said, if done well, private lending can be a great way to add more passive monthly income to your portfolio.

In my experience, these are some of the main reasons people get into private money lending:

Having a large disposable income from your employment or a business (or both)
Actively building your retirement account
Already having built a large retirement account such as a self-directed IRA or 401(k)
To diversify your investment portfolio (out of stocks and shares, mostly)
Needing more passive income – for example a retiree
To invest in real estate, but you do not want to buy/rehab/manage/sell properties
Concern about the growing volatility associated with traditional financial markets, and the next recession
Inheritance of a lump sum
Specifically needing monthly income from your investments to cover living costs
Freedom to help others achieve financial success

If any of these apply to you, you might want to consider an investment in private lending. Especially if you want to build a well-diversified portfolio that is not over-exposed to the stock market, or you need dependable, passive monthly income.

Additional Risks with Private Money Loans

There are several risks associated with private money loans, both for the borrower and the Shreveport bossier city private money lender.

A borrower may fail to fully check out the lender. It’s important to know where the money is coming from. Usually, it’s from a few independent investors who are looking for an investment return.

Making sure that the money is good and that the loan won’t suddenly fall apart is important.

If the borrower begins the process of moving into a rental space and then their loan falls apart, they can find themselves in serious trouble. Borrowers may also fail to fully read or understand a loan agreement and end up with a loan they can’t payback.

Lenders face risks also. That is why it is crucial for lenders to do their due diligence – to make certain that the borrower can be trusted to repay the loan. If a loan is given and the borrower uses it for a risky investment or on an opportunity that falls through, the borrower usually defaults on the loan. The Shreveport bossier city private money lender must face the reality that they won’t see all of the loans repaid, even if they take legal action.

Conclusion

All things considered, I think private lending is a great way to invest in real estate. Especially if you want more passive income, and you’d rather not involve yourself in the day-to-day stress, time, and costs of actual real estate ownership and/or construction.

When you become Shreveport bossier city private money lender the gates of success is open to you from all points. If done right you will be getting tons of returns on your money by working with the best of the best.

Remember, it is not a ticket to instant riches. Private lending will not make you rich. But a few well-placed investments with a quality Borrower(s) will earn you a solid and dependable passive monthly income, as well as add valuable diversification to your portfolio or retirement account.