Finding Private Lenders

My blog continues with tips from real estate investor Chris McClatchy on how to find private money. A lot of private money comes from sellers doing owner financing, or investors looking for a better return on their money than what they can get in the bank, or from people wanting to invest for higher returns in a self-directed IRA.

Other than sellers, how does a borrower find these folks with private money?

Again, speak up within your network and sphere of influence! Let people know what you need, by reaching out through various social media and "touches."

Touches may be coffee, lunch with a friend, phone calls, email, newsletter, blog, social media/websites.

McClatchy's lenders have included a friends mom, business owners, coworkers, other real estate investors, a banker referral to clients wanting more interest, even an NBA player and a bank employee.Tell everyone!
 

Borrowing private money is not about you, as much as it is about the lenders.  What are their goals and timelines?  Their financial situation.?  Do they want to increase their monthly income? Get a   return they can't find elsewhere?  

Real estate investors are creating jobs, supporting the local economy, building community and improving neighborhoods.  Give people the opportunity to invest in something that does so much good for their city. 

Private lenders want to avoid the Enrons, Bernie Madoffs and losses.  One way to prevent abuse is to be sure that a lender's funding is secured by property.  

It is up to the borrower to build relationships, educate potential lenders to get the appointment to sit down and discuss private money.  Send thank you notes and appreciate those who believe in you.  

Make prospective lenders curious with your elevator speech, e.g. "I rob banks legally."

Be excited! Use simple language, not so much real estate terms.  For example, "The rent more than covers the loan I need;"  "I buy real estate with people tired of getting low returns and tired of the stock market gamble;"  " I share real estate deals with people looking to put money to work...private lenders"   

Be credible, be on time.  You must be sure about your deal and project confidence.  If you're not, why would they be?  

Protect their investment by sending money directly to the escrow company.  Ask if they have any questions?

Chris McClatchy usually asks for a 5 year term on a private loan.  But he adds that the lender could call the loan with 6 months notice.

Ask for and provide testimonials and referrals- "would you be comfortable telling people that we met your needs? and paid as promised or better."  

Pay your private lenders a week early,  and they usually re-up on your next real estate deal.  Send cards and notes with payments, letting your private lenders know how much you value their support, or keeping them posted on your progress.

So start searching for your private money today!

Happy New Year!
Happy Investing!

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