Private money Lenders earn their money by making loans and providing loan services to individuals who need private money lending (financing that is secured by real estate.) 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 these scenarios, the financial professional generally will fund only one or two small loans each year and plays the role of a broker to those seeking funding for the rest of the loans that come through the door.

Deciding whether to work with a private money broker or a private money lender is much like weighing whether to buy a house with the aid of a broker or whether to write an offer directly to the seller, representing yourself in the transaction.

Working With Direct Private Money Lenders

The benefits of working with a direct private money lender or investor are pretty cut and dry: it will cost you less money working with the end investor. Brokers are compensated for the work they do by charging points on the private money loan, usually in addition to any points the end lender charges. It is for this reason, as you get more brokers lined up in your transaction, the more the money is going to cost you when everything is said and done.

If you have been lucky enough to be working with a end of the line, direct investor who is a good match for your project, you will be able to talk with the investor or lender directly, and will be getting first hand information without having a middle man between you and the money. 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. This is because no one knows your scenario the way you do, no one else can discuss any odd issues better than you can, and no one knows the benefits that the transaction will bring like you do. The flip side of this, however, is working with the private money lender directly means that your loan either funds or it doesn’t, there are no other options if the private lender declines your loan, except to go back to looking for another direct lender who will fund your particular loan.

Benefits of Working With a Broker

The upside of working with a broker is also easy to see: 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. Working with a broker will give you professional help in packaging your loan, improving the chances that you are able to obtain the loan you need at the rate and term that work for you in the least amount of time without the need for you to stress and continue to look and present your deal to investors you do now know. Having a good broker will help you to complete the lengthy application and get it to the correct private money lenders for your particular scenario. Working with a private money broker will definately save you time and trouble in financing the transaction and be well worth the slightly higher cost.

When you get down to it, your choice to deal with a good, quality broker or directly with a private hard money lender will likely depend on whether or not you have a relationship with a investor directly and whether or not you want to present your scenario directly without the aid of a professional.