Private money lenders make a living by providing loans and servicing those loans to people who need  private money loans, ( financing that is secured by real estate.) There are generally two types of private money professionals, direct lenders and brokers. Most private money lenders are, in actuality brokers. There are also private money professionals who are direct lenders and brokers. In this case, the private money professional generally will fund one or up to a few small loans per year and plays the role of a broker to clients for the rest of the incoming loans that he or she brings in.

Choosing if you want to seek the services a private money broker or a private money lender is much like choosing whether to purchase a property with the with the aid of a real estate professional or whether to write an offer directly to the seller, representing yourself in the transaction.

Working With A Direct Lender

The upsides of working directly with a direct private money investor are clear on the surface: you save money by cutting out the middle man. Brokers are compensated for the work they do 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 you are likely to pay in fees (such as points) to accommodate that cost.

If you have been lucky enough to be working with a direct private money investor who is willing to fund your particular transaction, you will be able to speak directly with the investor or lender, and will be able to get all of your inforamtion straight from the horses mouth. 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. Simply because no one knows your transaction like you do, no one else can go over any extenuating circumstances better than you might be able to, and no one knows the benefits that the transaction will bring like you do. The down side to working directly with the investor, though, is working with the direct private money investor means that either your loan funds or it doesn’t, there are no other options if the direct lender turns you down, except to go back to searching for another direct lender who will fund your particular loan.

Working With a Broker

The benefits of using a broker are also straight forward: a good, honest broker who has experience and who has been in the business a while will have built 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, sharing information with you that will help you determine how much to expect based on the equity in your property, type of property you are collateralizing, the speed with which you need to close, and more.

Having a good broker will be able to help you complete the lengthy application and get it to the most likely  direct private money lenders for your particular situation. This should help ensure that your transaction goes as smooth as possible, and actually gets funded.

In the end, your choice to work with a seasoned broker or directly with a private hard money investor will depend on whether or not you have a relationship with a investor directly and whether or not you want to present your scenario directly without the aid of a professional.