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Important Things You Have To Know About Private Money Loans
Did you wake up one morning with an amazing product idea for a new business? Do you own a property that’s been sitting for years, waiting to be developed, yet you do not have the means to do so? Maybe you already have a business that’s been doing so well that you wish to expand it, but the bank won’t gamble on you? Whatever the reason is, if the bank refuses to loan you money, you can always opt for a private money loan to provide you the funds you need.
It has been said that there is a far greater chance of getting better returns with private loans than that of normal investment vehicles. Private loans is capable of making a ten to fifteen percent rate of return in just six months to one year, where a normal loan would only make a four to six percent rate of return for the same amount of time.
The sad thing about such an investment is that the returns are so high because they come with so much risks too compared to other forms of investments. Imagine a mutual fund or a certificate of deposit oozing with stability and then you compare it to a start-up business venture or a development of some large-scale corporate park.
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A good example on this would be independent contractors who plan on buying properties and homes they can renovate and sell again for a bigger profit are in need of private investors to beck them up. The interest the lender will receive will depend on the property they have decided on developing. The borrower promises financial returns to the lender and at the same time, he hands over the first mortgage or a promissory note regarding the funds. When there is trust between two parties, the relationship will work better and this is why the borrower will give the lender a guarantee that he or she will still have something to reap and sell in the event the business venture fails, regardless if it amounts to the value of the capital or not.
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One interesting fact is that a large number of private money loan deals are done with businesses within a fifty mile radius. There is no explanation for this but fact is that majority of start up business fail due to the lack of communication and understanding between the lender and the borrower.
People have to be aware though that this does not mean you can only limit yourself within your area because you have the internet and there you can find a wide variety of investors waiting to catch a good deal.