FUNDAMENTALS
PRIVATE LENDING
Scale Safelywith Private Money
BE SAVVY TO SCAMMERS AND FIND CREDIBLE PRIVATE LENDERS FOR YOUR DEALS
By Kat Hungerford
everage. OPM. Financing. Capital. Funding. For a real estate investor, the ability to scale comes down
doing. There are also no government institutions or licensing through which to verify that a private lender is legitimate. Anyone can put up a website, publicize attention-grabbing rates, and watch the applications roll in—complete with sensitive personal information and application fees. While the Federal Trade Commission and other federal agencies, state attorneys-general, and local law enforce- ment will investigate lending fraud, they are largely over- worked, understaffed, and faced with pursuing a moving target. For an experienced fraudster, escaping justice can be nearly as simple as moving to a new website and phone number, making borrower restitution rare. While the potential risks to private lending can feel
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to money. Banks and credit unions will only complete so many transactions with an investor before closing the door—if they will fund an REI deal at all. So, most inves- tors looking to scale beyond using their own capital will quickly find themselves hunting for private money. While the advantages are many, the underlying difficulty in working with a private lender is in the name: private. Like banks, private lenders each set their own underwrit- ing guidelines, fees, rates, terms, and conditions. Unlike banks, there are few government reporting requirements, so there is no place to ascertain whether rates and con- tract terms are in line with what other private lenders are
28 | think realty magazine :: august 2020
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