Private money lenders make a living by providing loans and servicing those loans to people who need  private money loans, (loans made by private individuals.) Private money lenders can be direct private money investors or simply brokers. Most professionals in the industry are actually brokers. Some private money lenders actually wear two hats, being both brokers and direct lenders. In this scenario, the financial professional usually will fund only a couple small loans, or even fractionalized shares of the loans, per year and works as a broker to those seeking funding for the bulk of the loans that he or she works on.

Deciding if you would like to seek the services a private money broker or a private money lender is much like selecting whether to purchase a property with the with the aid of a real estate professional or whether to write an offer directly to the seller, representing yourself in the transaction.

Working With Direct Private Money Lenders

The upsides of working with a direct private money lender or investor are easy to see: you save money by cutting out the middle man. Brokers are compensated for their time and effort by charging points on the loan transaction, often times in addition to the points the end investor charges. It is for this reason, the more brokers that are in a deal, the more the cost to you will be for that money (more brokers usually equals more points).

If you have chosen a end of the line, direct investor who is willing to fund your particular transaction, you will be dealing directly with the end user or investor, and will be able to get all of your inforamtion straight from the horses mouth. There are both positives and negatives to this.

By working with the end investor directly, you can be assured that you are hearing your information and updates first hand, which may allow you to close your transaction more smoothly. Simply because no one knows your particular situation the way you do, no one else can discuss any odd issues better than you might be able to, and no one is as committed to your business and your private money loan as you are. The down side to this, on the other hand, is working with the direct private money lender means that either your loan funds or it doesn’t, there are no other options if the direct lender turns you down, except to go back to searching for another direct lender who’s perameters your loan may fit.

Working With a Broker - Benefits

The benefits of using a broker are also straight forward: a good, honest broker who has experience and who has been in the business a while will have built relationships with the direct investors with whom your loan scenario will fit. A good broker will help you package your loan to your best advantage, sharing information with you that will help you determine how much to expect based on the equity in your property, type of property you are collateralizing, the speed with which you need to close, and more.

Having a good broker will help you to properly package your deal (which is very important) and send it to the correct  direct private money lenders for your transaction. Working with a broker should save you time and trouble in the long run and be well worth the 2-3% fee.

When you get right down to it, your decision to deal with a seasoned broker or directly with a private hard money investor depends upon whether you personally know a direct private money lender and whether or not you want to present your scenario directly without the aid of a professional.