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Private funds and finding people who are able to provide private funding can have a dramatic impact upon your ability to succeed at building lasting wealth. Many people find that without some assistance, taking the first step towards long term financial security can be difficult. Achieving your investment goals can be a complicated process and traditional lenders may shy away from individuals who have a poor or little credit rating. Many individuals find that securing the necessary funds to make a solid start to building can made easier when they approach private individuals for funding.

What are Private Funds?

Private funds are those financial resources that are made available through the private sector or private individuals. For those who are interested in building a business, seeking venture capital or investing in real estate, there are a number of private funding opportunities available. Using private funds provides you with the advantage of lower costs, but more importantly, private funds are generally more flexible than other loans.

With daily living expenses, mortgages, credit cards, car loans and other loans eating into your income, using private funds can be one means of securing the money you need to start getting ahead financially. If you use the private funding to begin building long term wealth, and you manage to create a solid profit margin through real estate investment, then private funds can really help you start to get ahead. Private funds will let you stay in control of your finances and provide opportunities for achieving your goals when you may not be able to receive the loan through a regular financial institution.

Securing private funds from private individuals generally means that you borrow the money from these lenders who in turn want a return on their investment. Borrowing in this way is a lot more flexible than borrowing from lending institutions. This gives you the advantage of tailoring a loan to fit your unique investment goals and lending requirements.

Securing Private Funding

Getting private funding for your investment goals could be easier than you imagine. You might find that you can secure funds through a family member, business associate or friend. One way to secure the funds is through simply letting people know that you are interested in borrowing the money. If someone is familiar with the process it will be easier. If you need to look further afield to find the money you need, you might still find that this is simpler than you had thought.

One option for securing private funding is to seek out lenders through networking via investment clubs, real estate clubs and via contacts you make in these places. Many investors who are seeking private funding will recommend that you 'prospect' for investors willing to put up the cash for your planned investment. By regularly networking and building your contact base, you'll find that you have a wider circle of people you can approach when seeking private funds. Once you have a solid group of contacts, you'll also find this can help you learn of new opportunities for real estate investment and you'll have a group of lenders who genuinely understand the investments you are making.

Another opportunity for finding potential lenders to provide private funding is via internet ads. These can help you gain more information about how to secure private funds, as well as a wealth of additional information through educational opportunities and reports. It's not advisable to advertise for prospective lenders online yourself. Instead, it is recommended that you attend networking events or investment workshops and similar to meet others who have an understanding of private funding and an interest in lending funds for profitable opportunities. The general rate of interest on private funds is fairly consistent with personal loans, sitting at about 9-15%. This makes the use of private funds a mutually beneficial activity for both the investor and the lender.

If you are seeking an opportunity to begin investing, then private funding for real estate investment is a chance to get started on the road to financial security and long term wealth. By using private funds, you can access the money necessary to carry out investment deals for mutual benefit. In securing funds where you may not have been able to if you had to go through traditional channels, you'll achieve your goals for real estate investment faster.

Read enough about the Phoenix (or elsewhere) real estate market, and someone will start spouting statistics. And while market stats are important to understand, one must exercise extreme caution in interpreting them, or listening to others interpretations.

Let's take a look at "Days on Market" (DOM), or "inventory", or "months supply". Whatever you prefer to call it, it is an oft-cited indicator of overall market conditions. And generally speaking, it's not a bad indicator. The supply of homes available for sale is a key component in understanding the overall real estate market conditions.

It is important to understand a few things though:

* Our current market really consists of three major categories of inventory: 1) Bank/lender owned homes (also known as REOs); 2) pre-foreclosure/ short sale properties; and 3) "normal" properties (homes that are owner/investor owned and not in a pre-foreclosure status).

* Real estate is local. And the Phoenix metro area is a BIG place. Any time statistics or price indexes are quoted for the entire Phoenix area, you have to understand that conditions across the Valley can vary dramatically. Even within a suburb, conditions can vary from subdivision to subdivision. Within a single large Master Planned Community, conditions can vary from neighborhood to neighborhood.


The supply of homes is a perfect example. The general consensus in the real estate industry is that a six-month supply of homes is considered a "balanced market". Less than a six month supply means we are in a seller's market and more than a six-month supply is an indicator that we are in a buyer's market.

At this moment in time, if you look at all the available inventory of homes across the Phoenix metro area, there is a 5.2 month supply of homes.

If you're a seller, you may be thinking, "Hallelujah! Phoenix is a seller's market!" and if you're a buyer you may be thinking, "Crap. I should have bought a home a couple of months ago when it was a buyer's market and I would have had more negotiating power."

Let's look at the categories of inventory that make up this number...

If you extract the data for just lender owned properties, you'll see a much different picture.

Currently in the Phoenix metro area, there is only a 1.1 month supply of foreclosed homes. That indicates a very strong sellers market for foreclosed homes. A close examination of the data shows that foreclosure inventory is down, sales are up and pending sales (those homes under contract but not yet closed) are also up.

OK, so now you need to understand why these numbers are what they are. And sometimes the numbers alone won't tell the whole story. Nothing in the numbers tell you that some large lenders and the Government Sponsored Entities Fannie Mae and Freddie Mac imposed moratoriums on foreclosures that are in the process of being lifted. Nothing in the numbers tell you that there is still a lot of short sale/pre-foreclosure inventory - much of which slips into the lender owned category when it doesn't sell on the open market.

There are almost 12,000 homes listed in a short sale position. And it would take 15.2 months to sell all the existing short sale properties - if there were no more properties placed on the market.

The simple fact is, no home lasts for 15 months in a short sale position. The lender will foreclose long before that time period expires.

And what if you are a "normal" seller? Just the guy who owns their home and wants/needs to sell it. You aren't in trouble with the payments, and you've got enough equity to sell at current values and repay your loan (and hopefully pocket a little cash at close).

There is a 11.9 month supply of "normal" homes. You my normal seller are still looking at a strong buyer's market. Yes, sales and pending sales are trending up, but they are nowhere close to what they were last year and the year before. On average, you can expect it to take almost a year to sell your home. And guess what? You also get to compete with that foreclosed home across the street. The seller there is a bank that has probably already taken it in the shorts, they have no emotional investment in the home, and they've priced it very aggressively to get it off their books.

The Bottom Line

Not all statistics are as they appear, nor does any one stat tell the entire story. Consolidating all types of listings across an area the size of Phoenix metro into one number is usually very misleading. Look closely at all real estate stats, keeping in mind that the variations across market segments and location can swing wildly (and change quickly). You should try to understand what the real estate market is like in your location, for your type of home in your situation. Just keep in mind that it is very easy to generalize and misinterpret real estate market stats, particularly the data that aggregate large areas of completely different property types.