In a study performed by Hanley Wood Market Intelligence, it was found that 38% of the homes purchased in 2011 were bought with all cash. This is slightly higher than 2010, during which 34% of all homes purchased were bought with cash. By comparison, only 19% of the homes purchased in 2006 were paid for with cash.

There is a lot of speculation on the reason for the high percentage of all-cash purchases but one could easily arrive at the conclusion that much of the cause lies in the tight lending guidelines being used by the banks. It could also be caused by the volume on homes that are in need to significant repairs.

While many people who are paying cash for homes are investors who are flipping properties, some have found that they can limit their exposure and increase their profits by using private money (also known as hard money) loans.

Because these loans are made by individuals rather than banks, the lending requirements are different. In most cases, the decision for making the loan is primarily based on the equity in the property.

This allows investors to get loans on properties that traditional lenders won’t touch because of the repairs needed. Of course, the properties the banks won’t lend on are the exact properties that lenders want to buy because the profit margins on them are higher.

So, if you want to buy property to fix and flip or even fix and keep, private money could be a solution when the banks won’t lend.