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Understanding Home Ownership- The Beginning

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  1. Module 1: Understanding Mindset
    9 Lessons
    |
    1 Quiz
  2. Module 2: Understanding What you want your money to do for you?
    6 Lessons
    |
    1 Quiz
  3. Module 3: Understanding The Types of Real Estate Investments
    7 Lessons
    |
    1 Quiz
  4. Module 4: Understanding The Resources
    11 Lessons
    |
    1 Quiz
  5. Module 5: Understanding The Finance
    15 Lessons
    |
    1 Quiz
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Private Money

Private money is similar to hard money in many respects, but is usually  distinguishable due to the relationship between the lender and the borrower.  Typically, with “private money,” the lender is not a professional lender like a  hard money lender, but rather an individual looking to achieve higher returns  on their cash. Oftentimes, there is a close relationship with a private money  lender ahead of time, and these lenders are often much less “business”  oriented than hard money lenders. Additionally, private money usually has  fewer fees and points, and the term length can be negotiated more easily to  serve the best interest of both parties.

Private lenders will lend you cash to buy property in exchange for a specific interest rate. Their investment is  secured by a promissory note or mortgage on the property which means if you don’t pay, they can foreclose  and take the house (just like a bank, hard money, or most other loan types). The interest rate given to a  private lender is usually established up front and the money is lent for a specified period of time, anywhere  from six months to thirty years.

A private lender typically does not receive any equity stake in cash flow future value outside of their pre-  determined interest rate, but there are no hard-and-fast rules when it comes to private capital. Generally,  private money is financed by one investor. These loans are also commonly used when you believe you can  raise the value of the property over a short period of time, so you can take on the debt from that private  money, refinance the property after adding value, and pay back the private lender. Just like with hard money,  private money should only be used when you have multiple, clearly defined exit strategies.

If you are trying to build relationships for private capital, developing credibility is a MUST. Whether it’s  through blogging about your real estate endeavors online, posting your real estate updates on Facebook,  talking about real estate investing in casual conversation, or attending your local real estate investment club,  you need to be visible. Are you maximizing your visibility? Are you creating opportunities to highlight your  investing experience to others? You don’t need to be a braggart, but next time someone asks what’s new in  your life, share a few details of your real estate endeavors. You never know what might transpire.