Posts Tagged ‘lease option’

Private money can be used in a wide variety of real estate transactions. You can use it for buying the property, for rehabbing, for holding costs, or for marketing costs. In some parts of the country, you can borrow money privately for $20,000 – $50,000 and be able to pay for the purchase of the property because the price of houses are cheap. But in areas such as Seattle, where  the price of houses are so high, they are in the $200,000 – $500,000 it would be hard to fund these deals with private money. You will need to either find someone that has that kind of money available or put together a group of people and pool their money to buy the property. However, if you utilize private money in conjunction with creative real estate strategy like Subject To, Seller Financing, Lease Option, etc. it will be more doable to buy these high price houses. Then you don’t need to borrow a large amount of cash to fund these deals. There are so many people out there that have $20,000 – $50,000 that they can lend compared to $200,000.

When I buy a property that is in the $300,000 dollar range, I typically do Subject To so that I don’t have to pay off the underlying loan right away and then I borrow $30,000 in private money to pay for the closing cost, rehab cost, pay the underlying mortgage payments, and marketing cost. This allows me to buy the property with as little cash requirement as possible to cover all the expenses. And sometimes, I am able to put some cash in my pocket when I buy the property. This is a phenomenal way of utilizing private money.

So the more tools you have in your tool belt the better for you. Every deal is different. You need to use the tool that works for specific deal to get a better result. Same with private lender. You need to match them with the right property.  When you do this, then your private lender will be happy and everyone will be happy. You also need to tell your private lender where you are planning to use the funds so there is no confusion as to whether you spend it for something else.  Make sure that you spend that money wisely and accordingly because the worst thing that could happen is you run out of money to finish the project or not able to pay the mortgage payments and you default on the loan. Private money is available to you so that you can do the things you need to do to the property without having to use your own and be able to sell it quickly and make a profit.