BiggerPockets

Yes, private money is readily available but you have to develop your network of lenders. Just about anyone advertising as a "private" lender is the hard money type.

What you want is your own really private source of funds who know you, trust you and will move quickly when you find a great deal.

Unless we are assuming existing financing, 100% of the deals we are doing now, large and small, all use our private money sources for funding.

It's not an overnight process no matter what the gurus say. The key is to network, network, network. You never know who that person standing next to you at your kids baseball or hockey game knows who could help you. Talk to everyone, shy and access to private money are seldom characteristics of the same person.

Mr_Investor is right.

Get deals under your belt, and go to the private sector. These things take time. Instill some confidence, and issue a junk bond. Done.

But for now, be compliant & pool the funds yourself. Don't go looking for one guy with $100k. Find 30 people with $3k. It's actually easier.

BTW, I have private capital, and I'm not a hard money lender. I do 2nd mortgages. I'm just picky.

I agree with Taz. It is the other way around.

Pooling money is a big no, no.

Quick tips for Allen:

There are primarily 4 sources of Private Money:

1. Money under the mattress.
2. IRA accounts. Good amount of information is at trustetc.com
3. Seller financing.
4. "Cash values" of life insurance.

75% of Private Money will come from friends and family. So start being VERY nice to them, if you have not been already. LOL!

It is easier to get equity partner compared to getting a debt partner.

Equity partner will take a bigger split. Debt partner would be fine with 8%-12% return.

You don't want to have too many investors in one deal. Most states have exemption rules if you are dealing with around 8-10 investors as long as you don't pool money.

If you pool money from even two people, you have to file all kinds of state and or SEC forms.

When you mix investors from two different states, things get complicated.

Since you have good credit, you may borrow up to $25,000 at great rates from LendingClub.com. Which is basically quick Private Money or a "sob-story" :) money source. Prosper.com is bigger but it is in quiet period right now. Loanio.com is getting compliant. Zopa.com is another source which may work for some borrowers.

I wrote a book on Private Money called " Private Money: The #1 Solution to Eliminate Booms and Busts in Real Estate Forever!". The book basically has two purposes, that is:

1. Mr. Real Estate Entrepreneur say hello to Ms. Private Money and get
to know her world, especially her pain points.

2. Ms. Private Money say hello to Mr. Real Estate Entrepreneur and get
to know his world, especially what he has to offer as the best asset
class for your portfolio.

I am estimating that 80%-90% of the buyers would be Real Estate
Entrepreneurs who will either make it available to their Private Money
lenders, or to use the information in the book as talking points when
communicating with their Private Lenders.

i like the lendingclub site...i used to go on prosper all the time, and when it froze up i had no where to look.

thanks for the site suggestion lee.

I have a network of private European cash investors looking for projects worldwide. If you can email Heather at [EMAIL REMOVED] or give her a call@ [PHONE NUMBER REMOVED], she will give you information about all of our programs. We have been in the business for over 20 years!

I'm about to get into this myself and have been networking hard which has lead to getting some future meetings set up with some private equity people. I am employing two different strategies.

The first is utilizing people's IRA accounts. A self directed IRA can act as a bank. You can structure the deal how you like as long as both parties are in agreement on the terms. I use a three to five year exit strategy of buy and hold for cash flow with an eventual sale. I buy well below market so that LTV, including repairs and closing costs, is in the neighborhood of 50%-60% which is a pretty safe risk. I try not to pay too much over market in terms of interest rates so that I have a good cash flow and then when I sell, I cut them in for a percentage on the back end. When annualized together it works out to about a 15% ROI for the debt holder.

The second strategy is to approach high net worth individuals who I find out about through my CPA or attorney or through friends who are in that field. They generally know or handle people with that kind of money. These are people who often invest in muni bonds because they are considered to be a safe haven. However, with the financial issues most municipalities and states are facing, they no longer are risk free. I sell against that because in essence, they would be investing in an asset that is worth twice the loan amount and I structure the return the same as the above scenario.

It really all depends on you and how aggressive you want to be and what type of terms you want to offer. I don't want to be too greedy and at the same time show the investor some success so they will be more comfortable going into bigger deals down the line.

Rather than trying to establish private investor relationships which as we can see can be very tricky, you may be better off working with a good seasoned hard money lender. You may find the results much more satisfying.

Hi Eli,
I'm doing both. For the holds, ideally 2-4 years before I can cash them out.
Best,
Allen

One nationwide hard money lender I have come across is 1stquickfunding.com. I haven't worked with them but it may be worth a quick look.