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Private money lenders make a living by providing loans and servicing those loans to people who need private money lending (loans made by private individuals.) Private money lenders can be direct private money investors or simply brokers. Most private money lenders are, in actuality brokers. Some of these people are both direct lenders and brokers. In these scenarios, the individual generally funds only a couple small loans, or even fractionalized shares of the loans, per year and plays the role of a broker to borrowers for the bulk of the loans that he or she works on.

Choosing if you want to seek the services a private money broker or a private money lender is much like selecting whether to purchase a home with the help of a realtor or whether to write an offer directly to the seller, representing yourself in the transaction.

Working Direct With The Decision makers

The upsides of working with a direct private money lender or investor are clear on the surface: it will cost you less money working with the end investor. Brokers are paid for their services through a portion of the points that are charged on a private money loan. Therefore, the more brokers that are in a deal, the more the cost to you will be for that money (more brokers usually equals more points).

If you have chosen a end of the line, direct investor who is a good fit for your real estate loan request, will be talking with and presenting your project directly to the investor, avoiding the ?run around? that so many private money borrowers fall prey to. This can be both good and bad.

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 due to the fact that no one knows your particular situation like you do, no one can go over any potential negatives to your transaction better than you can, and no one knows the benefits that the transaction will bring like you do. The down side to this, on the other hand, is working with the direct private money lender means that your loan either funds or it doesn't, there are no other options if the private lender declines your request, except to go back to calling around for another direct lender who's perameters your loan may fit.

Why You Should Work With a Broker

The advantage of working with a broker is also clear: a good, hard working, well connected broker will know and have 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, boosting your chances of finding and obtaining the financing you require at the terms that work for you in the proper amount of time without the need for you to do all the legwork and carry all the stress of looking for the money. Having a good broker will enable you to complete the lengthy application and send it to the correct private money lenders for your transaction. Having a good broker should reduce the stress, legwork and time it will take to complete your transaction.

At the end of the day, your decision to deal with a seasoned broker or directly with a private hard money investor will likely depend on whether you have a relationship with a direct private investor and whether you are comfortable presenting and packaging your loan request without the assistance of a professional.

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