Those not familiar with private financing and how it relates to real estate investing may not know the full story. Without doing much research, at first glance a privately financed project that provides double-digit returns within a relatively short period of time, say six months or so, seems a bit on the highprivate financing moves houses side as it relates to the financing costs.

Yes, when investors need a private loan the rates will be higher but without the investment it would negatively affect the real estate market as a whole and keep many from owning their own home or finding an affordable place to rent. How does private financing affect either?

Your retail bank on the street corner or mortgage company is in the business to make loans. They borrow money at one rate and lend those funds at a higher rate to others. Yet as it relates to real estate investments, the property being financed must meet certain requirements. Most requirements are relatively easy to meet such as finding comparable sales in the area and in a habitable state. However, distressed properties can fall into such a state of disrepair that the bank will refuse to issue a loan. The property must be renovated and livable before a traditional loan can be obtained.

With fewer properties on the market, buyers have fewer choices, driving up prices, keeping many buyers on the sidelines and forcing higher rents for local tenants. However, with private financing at hand, these properties may be bought, renovated and sold to someone who finances the acquisition with a conventional mortgage. Without private financing, many properties would never be sold and end up as an unneeded tear-down.