Cash is king in today’s real estate market. The real estate correction in the Denver market has presented ample opportunity for small residential investors, to large commercial investors and developers seeking distressed prices on qualified assets.
The common denominators in successfully closing distressed opportunities are relationships and capital. Without access to capital and seasoned relationships to access distressed opportunities, obtaining profitable assets is very difficult. Private money lenders are a key component in not only the Denver real estate investment market, but all across the country.
Private money lenders are able to offer the capital necessary to fund opportunities, as well as contacts to potential deals. The main function of private money lenders is to supply the capital necessary to close a real estate transaction, or supply capital to investors or individuals using real estate as collateral.
The most common safe guard private money lenders use to protect themselves, is to take the first deed of trust on a property. The first deed of trust gives control to whoever has equitable title, so if borrower is in default, the pledged asset would become the property of the first deed of trust holder, or the private money lender.
Since asset values have dropped so much in certain markets, private money lenders often cross-collateralize. This means borrowers may further secure a prospective loan by pledging not only the first deed of trust, but other properties, equities or position in deals.
Private money lenders are an option after banks, loans are not regulated and done on the lender’s terms. The non-regulation also allows them to structure deals very uniquely that can only be done through private sources, but this money doesn’t come cheap. It is common for borrowers to pay several points (percent) upfront, or on the back, as well as double figure interest rates.
There are several private money lending options in Denver, but carefully choosing who borrowers work with and trust is a must. A lot of brokers pose as lenders, which can lead to wasted time.
There are brokers in the Denver area who are real and do bring value through negotiation and relationships, but verifying their track record is important. If a daisy chain is involved and “private money lenders” turn out to be investors themselves sourcing deals, prospective borrowers could find their deal swept from beneath their feet.
Working with a professional source and using the proper contracts to protect themselves will allow borrowers to source money for deals that make sense, but are lacking the cash needed to successfully close.
To learn more about private lending opportunities in Denver, or inquire about potential capital for your opportunity, sign up today.
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