Private Lending Bank vs Private Investor

[Brian McKelvey]

I wanted to get some advice or perhaps some guidance on what other people's experience with hard money lending bank vs private individual investors is. As a first-time RE investor, I don't have the upfront cash to fund the downpayment, and I'm not going to let that prevent me from being an investor. Is it more advantageous to work with a hard money bank or an individual investor? I have a feeling that most investors would agree that working with an individual willing to provide financing would be the better way to go, but I wanted to get people's thoughts as to what might be more advantageous. Thanks in advance for any responses!

[Don Konipol]

Without capital for the downpayment, or experience as a real estate investor, you will not be able to obtain financing from a hard money lender, or any private lender that knows what he's doing.  Many inexperienced novices listen to all the hype, promises, promotions, etc of gurus, and their mind suspends reality.

Hard money lenders and private lenders do not lend money for a down payment; this would place them in second lien position with no equity cushion, with a borrower with no skin in the game and no capital reserve to call on should things go south, resulting in a probable total loss of their investment if they have to foreclose.

Any lender, whether hard money or private money ( who lend short term at high interest and high points) or conventional, want a decent shot at getting their principal back if the borrower fails.  This means a borrower with a financial commitment providing an incentive for him to stay with a tough situation and a cushion between the value of the property and the amount of the loan.  In actuality, hard money lenders lend at a lower loan to value than conventional lenders; however they lend to people who do not qualify, or on property that does not qualify for a conventional mortgage loan.

My advice to a person wanting to get into real estate investing without capital, knowledge or experience is to 

1. Obtain knowledge through REAL education (not the guru crap)

2. Obtain experience through working for a real estate company, perhaps obtaining a salesman's/brokers license

3. Save sufficient capital for a decent size down payment on a small income producing property.

Once you have established a track record of successful investments private money in the form of debt or partnership capital will become obtainable.