Peeling Back The Curtain On Private Money

There's actually quite a few ways that private money is available to just about anyone. The first and most obvious is through well to do people you know. Doctors, lawyers, business owners, etc will often make their surplus funds available to friends and family. This is typically the most difficult way to access private money because most people don't know someone like this or may not feel comfortable even asking someone they do know to borrow their money.

The next option is really interesting and I'm fairly certain you haven't heard of this before. Now I know you are probably familiar with individual retirement accounts (IRA). You more than likely have one. What you may not know is that you do NOT have to put the money in your IRA into mutual funds or the market. Even more interesting is that you do NOT have to use a financial advisor to control how the money in your IRA is invested.

You can actually have what is called a "Self Directed IRA" which allows you full control over how your funds are invested. Many well to do people will give private money loans out of the funds they have in their self directed IRA's. There's two ways that people who own self directed IRA's make their money available to regular people - either just on their own or through an association with some type of group.

These groups take a couple of forms. Sometimes it's by joining a hedge fund. But more commonly the owner of the self directed IRA connects with hard money lenders. These lenders are basically a conduit that puts people looking for a private money loan in front of the person who wants to lend the money. The lender than handles all the paperwork and services the loan in exchange for some fees.

There are any number of reasons that someone may be in need of a private money loan. Too many to really cover in the scope of this article. So what I want to do here is narrow it down to the most common use - real estate investments.

If you think about it, it makes sense because a big part of our economy is based on the real estate market. People with self directed IRA's love the fact that real estate is tangible, it's a hard asset as opposed to stocks, bonds and mutual funds.

On the flip side, most real estate investments do not qualify for a "traditional" type of loan because the property doesn't meet FHA requirements. And many times the investor himself doesn't have the credentials needed to qualify for a conventional loan. Private money loans are the ONLY way that most real estate investors can finance their deals.

Well, if you've gotten this far, you must be serious about investing in real estate and need to know how you can get a private money loan. Here I am going to give you some tips that can help you along your way.

Tip #1 - work with a hard money lender. It's the fastest and easiest way to get private hard money loans. You could waste a ton of time and face quite a bit of embarrassment talking to friends and family about borrowing money from them.

Tip #2 - understand the rules of the private hard money loan game. There are several tricky things you need to account for before you dive into getting a loan. Remember, this is totally different that getting a mortgage for a house you are going to live in!

What I've done is write an article on my website that gives you the two crucial rules you must obey when getting private money.