Hazard Insurance Is a Must with Private Investing

In these economic times seeing the market fluctuate is not uncommon. During times such as we are currently experiencing private lending has become a favorable transaction for many borrowers. The meltdown of the global economics has made the use of hard money lending for private investors even more important than ever before. Borrowers are finding that private lenders do not charge points and that the lenders will consider the borrower's needs that may not fall inside the defined parameters of a specific transaction.

Private real estate lending is seen to be the best way to fund a short or long term investment strategy for many borrowers. While this type of lending works similar to bank loans, a bank is a private individual with no stringent lending criteria and works with a Note and Deed of Trust or Mortgage for funding your deal.

Private lenders provide faster, more efficient transactions. With fewer questions the process moves faster. Hard money lending allows a fast closing motivates many sellers these days and along with paying cash you will get a lower price than the conventional method of selling through a realtor.

A hard money lender may require real estate investors to furnish certain documents that will secure the investment capital. A Deed of Trust or in some states a Mortgage will be required. This will be recorded in the county clerk’s office and secures the investment against the real property as collateral. A Promissory Note is also requested which is the lender’s collateral for their investment capital. An Appraisal may also be required. Most real estate investors research the value of a property online when making their decision on this investment in the beginning. If the property to be purchased requires significant renovation, an appraisal may not be necessary if the purchase price is below market. If an appraisal is done ask the appraiser for an ARV (after repaired value) figure on the appraisal.

Most important to have is a Hazard Insurance Policy. You should list the ‘mortgagee’ as the private lender to protect them in case of fire or natural disaster, etc. When making private real estate investments, regardless if for a long term or short term, remember that hazard insurance is a must to protect the private investor’s money as well as your own. Private lending is a growing trend to make up for all that was lost with the weakened economy.