Money talks when you are buying real estate. The last thing you need when moving on a deal is trouble with a bank loan or lack of cash. Take it from experienced investors who never fret over the limits of conventional financing. They know how to make more deals happen with private money.
For every banker who turns down your loan application, there is a private lender looking to fund your next home investment. Make it your job to find private funding from the right investor—and both you and your investor can be laughing all the way to the bank.
A private lender is anyone with money to loan, from your friend’s father to an angel investor. Asking for private money becomes easy once you realize how much benefit you bring your lender.
Whether you are wholesaling or fixing properties, other people’s money allows you to structure win-win deals. While you enjoy the freedom to close deals quickly, your private lender reaps a high return on investment with very little risk.
Build Relationships Before You Do Anything Else
Instead of hounding investors for private funding, get to know them. Find ways in which your next property purchase can benefit both of you. Just by letting people know what you do you will be surprised at the relationships you build with potential lenders.
Spend time developing a strong elevator pitch—a short recital of what you do and how your proposed investment matters to your potential lender. With practice, any lender you approach will want to take a closer look at your business plan.
1. Network Close to Home
Start networking in your own back yard—with friends, family and everyone you know. Remember your real estate investment will yield them a high return.
Find private money and become educated by networking at local Real Estate Investment Association (REIA) meetings. Attend local Meetup groups of investors, entrepreneurs and real estate professionals.
2. Reach Out to Real Estate Mentors and Coaches
While you are learning from a real estate mentor or coach, ask for a private loan. Many of them provide private money for mutually beneficial real estate deals. Mentors and coaches can be found in your local area or online.
3. Contact Mortgage Brokers for Referrals
Get to know local mortgage brokers who are connected with private lenders. With increasing numbers of investors in private mortgage lending, you can often gain referrals from brokers.
4. Contact Real Estate Financing Companies
Get referrals from managers at real estate financing companies who oversee private lending pools.
5. Market and Advertise
Advertise directly to private lenders looking for their next real estate investment. Post ads on Craigslist, in money lending publications or on the website of the American Association of Private Lending (AAPLonline.com). Try posting flyers or sending postcards.
6. Look Up Investor Programs
Private investors join groups to more easily connect with entrepreneurs. You can find angel investors through investor search programs both locally and online.
Angel investors, who seek a high return on their investment, lend private money for real estate and other ventures. At the same time, an investment angel who is right for you will provide knowledge, experience and networking opportunities to help you grow your business. You might even find a partner.
7. Capitalize on Social Networking
Find private money from all over the world through online social media. Build a profile on Linked In—the largest professional social media site in the world—and join some of its investing groups. Create a page on Facebook or Google Plus. You can also join online investment forums to interact with potential lenders.
8. Research Public Records
Research county public records for title deeds backed by private investors who you can contact. Or search for real estate investors you can contact who have purchased through self directed IRAs—an ideal vehicle for real estate.
9. Develop a Database of Private Money Lenders
As you build relationships with potential private lenders, collect names into a database. If you want to grow your real estate investments, you need to more than one good private money source.
Email your pool of private money lenders with a link to your website or an update on your latest deal.
10. Turn a Seller into a Private Lender
Your seller can profit by becoming a private mortgage lender—securing a mortgage with a low-risk, high interest rate loan against the property.
Potential private lenders are everywhere. Be persistent and realize you are not just using other people’s money. You are providing them a low risk opportunity to make high returns.
Whether you plan to invest in wholesale or fix-n-flip property, think like successful real estate investors and look for private lenders.
- A private lender is anyone with money to loan.
- Asking for private money is easier than asking for money from the bank, once you realize the benefits to both parties.
- You will generate more private money by focusing first on good relationships with potential investors.
- Network at local Real Estate Investment Association (REIA) meetings.
- Real estate mentors and coaches lend private money because it benefits both them and you.
- Find private money through angel investors in online or local investor programs.
- Find private funding by circulating on Linked In—the largest professional social media site in the world.
- Develop a database of private lenders for all your real estate investments.
- Potential private investors are everywhere—make it your job to find them.
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