Finding a property that’s a good investment is only half the battle. Unless you have enough money to buy the property in cash, you’ll have to find a way to finance the deal. And if a traditional mortgage is out of the picture, you’ll need to get creative. 4 Unique Financing Strategies to Consider If a traditional bank loan isn’t an option, then you may find the following unique financing strategies enticing. 1. Seller Financing Seller financing is the first thing that comes to mind. With seller financing, the seller of the property acts as the bank and agrees to sell you the property while accepting monthly payments for a predetermined period of time. This method only works if the seller already owns the property free and clear (or has a very small amount of outstanding premium remaining). It also has to work out just right since a lot of sellers don’t want to deal with what seems like a complicated process. Related: The Comprehensive Guide for Financing Your Very First Real Estate Deal 2. High Leverage Investing Have you ever thought about high leverage investing? This method is notably risky, but can work if you have some time, experience, and the financial means to take a loss and still be fine. Futures trading is one of the first investment niches that comes to mind. It can be complicated and challenging, but futures trading offers massive leverage. Thus, if you know what you’re doing, you can turn a small amount of money into a large amount of capital in a short period of time. As a result, you may be able to put a down payment on a property without having to bring on other investors. 3. Hard Money Lending Many investors have found success using hard money lending. Hard money lenders operate in a private mortgage market and lend their own money to investors in return for higher interest rates and shorter payback periods. The benefit of using a hard money lender is that their requirements are usually less stringent and the approval process takes far less time. You can often find hard money lenders in local investment clubs or even in your social circle. Related: How I Went From $0 Net Worth to Qualifying for $1M in Real Estate Financing in 2.5 Years 4. Peer-to-Peer Lending Over the past few years, peer-to-peer (P2P) lending has gone from a cute little niche strategy to something that a lot of successful real estate investors are using to finance deals. P2P lending is essentially an investment version of crowdfunding. Large pools of people come together online and contribute varying sums of money until the entire deal is financed. The investors then get principal plus interest back in return. This allows someone with limited resources to purchase a piece of real estate. Making Your Deal Financing Work Would it be nice to qualify for a traditional mortgage on every investment property? Would it be even nicer to have the resources to purchase real estate in cash? The answers are yes and yes, respectively. The problem is that the average investor—folks like you and me—can’t always make this happen. And it’s at this point that you have to decide whether you want to throw in the towel or find a way to make it work. Making a deal happen is rarely easy or straightforward. You’ll have to get creative, which could mean trying one of the alternative financing strategies discussed in this article. And until you give them a shot, you won’t know if they work. Have you tried any of the above strategies? What’s your go-to creative financing method? Leave your comments below! Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

One of the most common ways to get started with real estate investing is to utilize some form of private lending. There is a lot of literature on the subject of finding private lenders and convincing them to invest in your deals. But what does a private loan actually look like? What are the terms and how do these loans actually work? This is actually a really simple topic, but it seems to be somewhat ignored in the world of REI education. At the core, private loans are very similar to conventional loans. In fact, I would say they are very similar but much simpler! Below is a quick guide to help you understand what it means to borrow money from a private lender. What is a Private Lender? I define a private lender as an individual (or small group of individuals, e.g. a married couple) who loans money. That’s it! This lender is “private” because you are borrowing from a person instead of a financial company or institution. In some cases, these lenders seek liability protection through an LLC or corporation, but in general, private lenders are individuals. It’s important to distinguish private lenders from hard money lenders. While these two categories do have some commonalities, they are certainly not the same. Hard money lenders are institutions with well-defined lending criteria and terms. Their core reason for existence is to lend money and make a huge return. On the contrary, private lenders almost always have other primary jobs, careers and/or business ventures. They are usually lending money as a side project to something else that takes up the majority of their time. Private lenders come from all different careers and backgrounds. A common source of private money is from your immediate social and family networks. Parents, uncles, in-laws, neighbors, co-workers, and fellow volunteers are all common sources for private lending. Related: How My Investor Friend Grew a Student Housing Empire Using Private Money 3 Key Documents The Promissory Note The promissory note is the core document of any private loan. The promissory note is the contract signed by you and the lender indicating all the relevant and import details about the loan and the loan repayment. This document can be as short as one paragraph or as long as 30-page document. While there is no set standard for what a promissory note should look like, most tend to include the same terms and conditions. The Mortgage Many loans will also have a mortgage. A mortgage is a separate document from the promissory note. The mortgage details the real property that is to be pledged as collateral for the associated promissory note. Depending on your agreement, your private lender may or may not require a mortgage. As many of us a know, a mortgage allows the lender to foreclose and take possession of your property should you default on your loan. The Amortization Schedule The amortization schedule lays out all the payments you will make on the loan. This is usually a large table indicating date of payment, principal amount, interest amount, remaining balance, etc. Loan Terms Please keep in mind that the examples below may or not be typical. I am simply providing my personal experience. I am sure there are many loans that are way different from what I describe below. Nonetheless, I hope you find use in real numbers. Principal The amount of money being loaned. At some point in time, this money must be returned to the lender. This can be paid in monthly installments, a one-time balloon payment, or a combination of the two. My experience: There is really no low or high limit to private loans. I’ve borrowed as little as $5,000 and as much as $210,000 from private lenders. My average loan is about $50,000.  Interest Rate The interest rate is usually the main cost associated with any loan. To you, this is considered your “cost of money.” To your lender, this can be translated into “return on investment.” Interest rates are usually defined in annual terms. However, it is common for interest to be calculated/compounded on a monthly basis. Many investors are not familiar with how your monthly interest payment is calculated. Your interest is actually accrued on a daily basis from the day of your last payment. The annual interest rate is converted to a daily rate by dividing by 360 (sometimes 365, depending on the lender). Accrued Interest = # of Days Since Last Payment x ([Principal Balance] x [Annual Interest Rate] ÷ 360) In a traditional, amortized loan, you pay off your total accrued interest + a little principal with every payment. As you move through the amortization of your loan, the proportion of your payment allocated to interest decreases while the amount paid to principal increases. My experience: For the most part, private lenders are happy with an interest rate that is at least as high as what they might expect from more traditional investments (e.g. the stock market). I’ve paid as low as 7% and as high as 16% on private loans. My average interest rate is 8%. Points/ Loan Initiation Fee This is an additional cost added to some private loans (and conventional loans for that matter). This is often a flat fee that is paid at closing (instead of “paying” the fee, points are often withheld from the principal at closing). Points will usually be represented as a percentage of the loan principal. My experience: I’ve only had one private lender charge points. In this case, it was 3% of the loan principal. Most family and friends do not charge points. The lender I was working with was bordering on being classified as a hard money lender.  Amortization A loan’s amortization is the time over which the loan principal is repaid to the lender. If a loan has an amortization of 10 years, the loan principal will be paid in full after 10 years (assuming the borrower makes the required monthly payments). The longer the loan’s amortization, the lower the monthly payment and the higher the total cost to the borrower over the lifetime of the loan. Related: 4 Simple Steps for Newbie Investors to Start Raising Private Money It’s also possible to for a loan to be “interest only.” In this scenario, your loan does not amortize at all. Instead, you make monthly interest-only payments until a scheduled balloon payment. My experience: About half of my private loans are interest-only. The other half are almost all 5-10 year amortizations.  Term The total amount of time you will have an outstanding balance on the loan principal. Often, the loan amortization is the same as the loan term. In these instances, your final payment of principal and interest fulfills your obligation to your lender. In cases where the term is shorter than the amortization, we have what is called a “balloon payment.” A balloon payment simply means that on a date specified in the promissory note, the remaining outstanding balance is due to the lender. The borrow must find some means of repaying the entire remaining principal (refinance, sale, new loan, cash). My experience: Interest only loans are typically due within one year. Amortized loans are usually due within 3-5 years.  Prepayment Penalty A prepayment penalty helps to protect the lender against the borrower getting out of the deal too early. A lender makes a decision to lend based on the length of time he/she expects to make a profit on the deal. If they go into a deal expecting to receive interest for 10 years, they may be upset if you were to pay off the loan after only one year. Enter prepayment penalties. These penalties are usually a percentage of the original or remaining loan amount. They must be paid if the borrower pays back the lender too early. My experience: Most of my private loans have short enough terms that the lender does not bother with a prepayment penalty. Loans with terms of 20 or so years may have a prepayment penalty for the first few years.  Examples Now that we understand typical terms included in a private loan, let’s see them in practice. Below are four examples to give you a taste of the types of private loans you may come across. Example #1 A loan with the following terms… Principal: $100,000 Annual Interest Rate: 8.25% Points: 0% Amortization: 10 Years Term: 10 Years Prepayment Penalty: 0% Paid Off at the End of 10 Years Would mean…. Monthly Payment: $1,226.53 Last Payment: $1,226.53 Total Cost of Loan: $47,183 Example #2 A loan with the following terms… Principal: $50,000 Annual Interest Rate: 11.00% Points: 2% Amortization: 10 Years Term: 5 Years Prepayment Penalty: 0% Paid Off at the End of 5 Years Would mean…. Monthly Payment: $688.75 Last Payment: $32,366.45 Total Cost of Loan: $24,002.71 (interest:23,002.71 + points: $1,000 = $24,002.71) Example #3 A loan with the following terms… Principal: $75,000 Annual Interest Rate: 10.00% Points: 3.00% Amortization: 10 Years Term: 10 Years Prepayment Penalty: 5% in year 1, decreasing by 1% each year, 0% after year 5 Paid Off at the End of 3 Years (2% of remaining balance as a prepayment penalty) Would mean…. Monthly Payment: $991.13 Last Payment: $61,879.37 (balloon payment: $60,693.53 + prepayment penalty: $1,203.84) Total Cost of Loan: $23,836.94 (interest: $20,383.10 + points: $2,250.00 + prepayment penalty: $1,203.84 = 23,836.94) Example #4 A loan with the following terms… Principal: $100,000 Annual Interest Rate: 12.00% Points: 0.00% Amortization: NONE — Interest Only Loan Term: 1 Year Prepayment Penalty: 0% Paid off at the end of 1 year Would mean…. Monthly Payment: $1,000.00 Last Payment: $100,000.00 Total cost of loan: $12,000.00 Private Loans Are Simple They may seem intimidating, but private loans are really simple. Once you have one or two under your belt, the terms of a loan will seem like second nature. Don’t down play the importance of opening up your business to private lenders. You never know when a private lender will become your one and only source of funding on a career-changing deal. Investors: Do you use private money to build your business? Why or why not? Let’s talk in the comments section below! Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! 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Unless you’ve been keeping residence under a rock someplace, you’ve by now listened to the BiggerPockets Podcast 108, which features entrepreneur and real estate mogul Grant Cardone. The show was one of the best for sure – almost as good as mine. Grant is the master of his universe. A lot of folks should be motivated by this podcast. However, if you listen between the lines — and you don’t have to dig too dip — Grant doesn’t not have too much love for the no money down (NMD) approach to investing. He makes this point of view known elsewhere as well. In fact, Grant and those who agree with his point of view don’t see NMD as investing at all. Since you absolutely can’t argue with Grant’s success, and he obviously must be taken very seriously, where does this leave Ben Leybovich, Brandon Turner, and 95% of the people on the BiggerPockets Forums and this blog? ‘Cause I hate to break it to Grant (like he cares), but most people have neither the kind of money to facilitate his style of investing nor the capacity to form businesses that can throw off this capital. Why NMD is Not Investing According to Grant Simple — the way he sees it, investing is defined as protecting and increasing equity, buying power, and magnitude of cash flow. In simpler terms, he thinks that an investor puts equity into the deal in order to convert the face value of it, as well as the cash flow that collateralizes it, from earned to passive. He and others believe that an investment of capital is the defining characteristic of “investment.” Related: The Book on Investing in Real Estate with No (and Low) Money Down I am not going to argue this point of view – his is the most bulletproof model. Liquidity is the mother of safety in many ways, and relative to this, a business has much more potential to generate meaningful cash flow than does real estate. Grant’s formula is one that many successful investors have used: Start a business. Grow it so it throws off a lot of cash. Take this cash, which happens to be rather highly taxed, and buy income-producing real property with it, which converts the face value of cash flow into a much lower-taxed real estate variety. And as Grant acknowledges, this cash flow is less but more stable, meaning that the equity it collateralizes is safer. Brilliant — and text-book effective. No argument at all! But is This the Only Way? How many out of 1,000 people who achieve some level of financial success via real estate do it Grant’s way? Perhaps one in a thousand? Sure, if you want to shoot for the stars, then look for way to model yourself after Grant. Follow the three steps outlined above. But I promise you, if you are starting out with nothing and want to retire with some element of dignity and cash flow that is a 100 multiple of that which your neighbors receive on their SSI checks, you don’t have to be one out of 1,000; you don’t have to be Grant Cardone. This is precisely what makes RE so good – you don’t have to be a genius! You just need to know a few things, and NMD by the way is quite helpful to most of us… Take Me for Example While my friends Brandon Turner, Serge Shukhat, and Brian Burke will definitely tell you that I am a genius — especially if you put a gun to their head  — I’m definitely not. I started out my college years intending to make money as a violinist, but this plan was interrupted when I was diagnosed with MS. My plan B… well, there was no plan B. There also was no income to speak of, considering I was making paychecks teaching kids at a preparatory department in a nearby college. I came into college with credits in advanced physics and calculus, and UC counsellors asked me why I bothered with music. I could be making so much more money going for a different degree. But I love music and was taught by my parents that if I do what I love, the money will come. Besides, I was better than the average Joe on the fiddle. So in spite of low income potential, I went for it. But as I mentioned, even that prospect of low income was taken off the table following my diagnosis. I am not a betting man; I like guaranteed returns, which is why I buy apartments. But if I were a betting man, I’d bet that 75% of you reading this are in somewhat of a similar situation. Well, here’s the thing. If you listen to Grant, you have no business investing in real estate. Why? Because the only way you can do it is NMD, and according to him, you’d be stupid to do it. According to Grant, you should either have the brains and the balls to create a business to facilitate investment in real estate, or go work for someone. I Disagree I started out with nothing. I had a spouse who believed in me and a capacity to think and learn, but that’s about it. I’ve built a portfolio of small to midsize multifamily units, which has allowed me not to work for a living. I am not rich (working on that), but I am not poor either. I have become an expert at creative finance and no money down because this was my only option. Today, as I write this, my partners and I are negotiating on a 90-unit. Maybe it’ll work out, in which case we’ll syndicate it, and maybe it won’t — that’s beside the point. Here are a few things to note: I had to work up to a point where a deal like this is even within the realm of possibilities. This wasn’t possible 4 years ago. It takes intellectual worth, you know what I’m saying? Guess what? It was the NMD deals that facilitated the learning. I have partners without whom I could not do this kind of a deal at this point. I need back-up. Both of these guys have more money and units than I do today (though this is not going to last). Both of them, I’d like to believe, take me seriously. Why? Because I’ve done a lot of things, and I’ve learned enough to not do even more things. They could be lying to me, but they tell me that I’m pretty smart. Guess what? I got “pretty smart” by doing nothing down deals. I’ve been using OPM for 8 years now, and if this deal comes through, I’ll be floating a PPM of $1,000,000+; I will raise $1M from investors who agree with my partners in thinking that I’m not stupid. Guess what? I got here by doing nothing down deals. Newbies, Listen Up! There is an important distinction I want you to wrap your heads around, and it is this: Nothing down is not the final destination. I don’t plan to retire carrying too much debt, and neither should you. However, NMD has been a stepping stone. For me, NMD has been the facilitator of critical mass in terms of both cash flow, balance sheet, and intellectual worth — and it absolutely can be for you as well! I am going to turn 40 in March. I have a portfolio (all bought with nothing down) that has allowed me to do vastly better financially than any music student I went to college with. It has allowed me not to work a job and instead to focus on learning RE. It has bought a margin of financial safety for my family, which is better than many (I’d say most) of my friends, even those earning high incomes! Related: How to Invest in Real Estate with No Money Down (4 Rules You NEED to Follow!) I get richer when I sleep, and it’s a nice feeling to know that my car payment is being made by my tenants. I love seeing my balance sheet going up by thousands of dollars every month. Amortization is a wonderful thing indeed! Even if I don’t make a dime of cash flow from any of the properties I currently own (as if), and if I never do another thing in RE, I am going to retire multimillionaire. Do I want to do it with the property I currently hold? No, probably not; I’ll trade up. But in concept, I am OK. My family is OK, and while I want more (and I’ll have more), I am OK. That’s a lot better than a violinist is supposed to be able to do. All of it was teed up by having the audacity to not listen Grant Cardone and go for it in the only way that I could: no money down. I am not a genius, and I am not special. If I can do it, you can do it. Appreciate and admire Grant Cardone. Listen to every last thing he has to say. But take him with a grain of salt as it relates to NMD. Done right, no money down works! Investors: What do you think? Is no money down truly “investing?” Is it a feasible way to build wealth?  Leave a comment below! Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

This post is for you guys who maybe have a few private lenders lined up or maybe have private lenders who are coming to you that want to do some work with you. Maybe you’ve even followed some of the advice that I have in my BiggerPockets book Raising Private Capital, because this book is about how to attract people who want to work with you and loan to you or invest with you or work with you in one way or another as either private lending partners or private investors in your business. (If not, check out the book in the BiggerPockets Bookstore.) But once you get these folks, how do you vet them and how do you decide which is the right private lender to work with for your business? How to Pick the Perfect Private Money Lender for Your Real Estate Deals Maybe you’ve got two or three different people. What can you do to pick or seek out the right private money lender for what you’re looking to set up in your business. Ask a lot of questions. The first thing you want to do is ask a lot of questions. Do NOT immediately start throwing deals at these people. Question #1: Oh, hey, Uncle Charlie wants to work with me and lend me money for my business. Let me immediately throw Uncle Charlie deals. Instead you need to ask: What is the source of the money? You need to ask this question because the source of the capital will in some ways dictate how you have to structure that deal. If they are taking their money from a self-directed IRA retirement account and they’re loaning it to you, then there are certain hoops that have to get jumped through with your self-directed IRA custodian. You might need to speak to that custodian. You might need to get some paperwork from that custodian. It will likely slow down their ability to close by several weeks to get that money released to you by their IRA custodian. There might be certain covenants and clauses in the loan docs that the IRA custodian is going to require. So if it’s an IRA, that’s one direction. Also, if it’s an IRA, there are some things that you can create there—win-win benefits for them and for you—that we’re going to talk about in the next section. Now another source could be, let’s say, you locate somebody in your network who owns their home free and clear. You’re able to show them that they could unlock that equity they have in their home and turn that equity loose in your business. They can do this to build their net worth, build their income, build their wealth by unlocking that equity in their house. So if the source is a home equity line of credit, you need to know that. The reason why you need to know that is that a home equity line of credit or even just a mortgage has a monthly payment. You, as the investor, need to make sure they’re making an income that’s enough to supplement and exceed the monthly payment they have to make to maintain that debt. If they’re investing with cash, here’s the cash conversation that comes up. If they say, listen, I’ve got $100,000 of cash that’s just sitting there in a CD that’s earning half a percent interest, you can pay them 8 percent interest. OK, that’s a great conversation. But you need to tell them, hey by the way, I’m going to be paying you 8 percent on your money, but you know that interest is taxable. You’re going to have to pay tax on the interest you make and declare to the IRS that’s interest you made on a loan. That’s not true for an IRA. It is, however, true for a home equity line of credit. But they still get to claim the interest that they had to pay for borrowing that money, so they only pay net tax on the spread that they make from what they borrowed the money for and what they’re loaning it to you for. But if they’re loaning you straight cash out of their own pocket, they will likely have to pay income tax to the IRS—however it calculates. They’re going to have to pay tax on that money. You need to disclose that to them. You don’t want any surprises about income tax. They would be very unhappy with you. The best real estate investors who work with private money folks are at the core educators, meaning you educate your private money investor who wants to work with you on why investing with you is amazing and also how investing with you works. Get that education yourself from BiggerPockets. Related: Hard Money vs. Private Money: What’s the Difference? Question #2: The next thing you want to talk to them about is: What are their goals? If you’ve got a private money person who’s looking to retire in two years versus a private money person who’s 30 years old but happens to have $100,000 in their IRA, those are two separate goals. I have also encountered people who want to invest full-time eventually. That’s a different goal. They might want to get an education from you. They might want to learn how to do what you do as part of them loaning to you. You might need to expose them to a bit of the nuts and bolts, walk them on the job site, and show them what you’re up to—all those things on a weekly or monthly basis—in exchange for them loaning to you. And maybe the interest rate doesn’t matter as much or what you’re going to pay them. The exposure that they get matters the most. This is why their goals matter. Try to know everything you can about where they want to go, their wealth goals, and their future life goals. Where do you want to be in five years? That’s the best way—you should ask that of everybody. If they don’t know, that’s a great conversation to have further, to help somebody discover that. Then through working with you, you can help them get where they want to go. Those goals can have things to do with money or with their life (like I want to be a full-time investor). Or maybe they love what they’re doing but want to save up for their kids, for college or something like that. I had an investor whose goal was to move back to Argentina. He was from there, moved to the U.S. for work, and because he did some investing with us, he was able to create a path to move back to Argentina eventually. This took like five years. It happened because he and I both knew what he wanted to do and because I asked that goals question. We evaluated what is income was through the turnkey investments he had made with us and through some of the private loans we had done. Today he’s back home in Argentina, where he grew up, and he’s making passive income off of investments he’s made in the States. Look to create a win-win situation. So once you’ve got your questions answered, the next thing you want to do to pick the right private lender is to make sure that they are on board for a win-win with you. You’ve got to win, too. You don’t want to work with somebody who’s out to get you. There are predatory lenders out there that pose as private money. You don’t want to work with those folks. Conversation #1: You want to discover just what the win-wins look like and enroll them in a win-win conversation. Win-wins might look like, if somebody’s got an IRA let’s say, maybe you can have the conversation about monthly payments. More specifically, if it’s an IRA, you don’t need to make monthly payments. How great would that be if you’re doing a fix and flip, well you’re not making any monthly payments during the life of the loan? You pay all the interest at the time the project’s complete. If they have an IRA, that money is not needed by them. They can’t do anything with it anyway, because it’s in the IRA. It’s just as fine for you to pay them all the money at the very end of the project versus during the life of the project. If their money source is real estate equity, they have to have monthly payments, because it’s not fiscally responsible for you to put them in a position where they’ve got to maintain that debt the whole time and make those monthly payments just so you don’t have to.  I would never ask somebody to do that. Then obviously if they have cash, they might want monthly payments, too, because it just increases their personal cash flow. They can touch the money, they can put it in their pocket and use it versus an IRA where they can’t do that. Related: 4 Risks and Drawbacks to Using Private Money Conversation #2: The next thing that you want to bring up is terms and rate. If you’ve got somebody who wants to give you hard money loan rates, like they want to charge you 15 percent interest plus three or four points (you know one point equals one percent of your loan amount), it’s not really a win-win. You have to pay that up front typically, so if you’re borrowing $100,000 and they want four points, that’s $4,000 you have to write to them at the day of closing as a profit line to them. There’s your points; here you go, Mr. Lender. And those points are due to them at closing regardless of how long the loan is. So if it’s a shorter loan, they actually make a better return on their investment, because they got their money back and they can go and charge those points again. Points in general are more of a hard money conversation. It’s less private money. So if you’ve got people who want to charge you a lot of points and a high interest rate, that’s not a win-win—unless you’re in a bind, unless you really need to do the deal fast. If it’s really, really a screaming hot deal and it still works at those rates and terms, fine. But I don’t like those types of terms as the standard moving forward, because it’s really not a win-win. Look carefully at the written terms and make sure that it’s a win-win for you. And what’s a win for them? A win for them brings them to their goals. So once you know their goals, you define the rest. If I didn’t know my investor wanted to go back to Argentina, I couldn’t define a win for him—that being carving a path for him getting back home. A win for me was to elevate and grow my business with favorable loan terms that I could use over and over again, knowing that capital was there for me. It was almost like a line of credit. As soon as I needed the money for a deal, he was able to produce it lickety-split for us to go and close. He was willing to buy projects we had that were ready for turnkey. It wasn’t “no questions asked”; he did his due diligence on it. But he was a ready, willing, and able buyer, so I knew that was a win for me. I was able to produce product to sell it to him as a turnkey or to produce some deal that he was willing to loan to me on. This was a great arrangement. The Bottom Line The bottom line is the way you vet a private lender is to ask lots of questions and make sure you structure win-wins. High interest rates and lots of points are not wins for you. Lots of hurdles for you to jump through, weeks or months it takes to get the closings are not wins for you. Watch my video above for more information and for a 20% off coupon to buy my book Raising Private Capital in the BiggerPockets Bookstore. Have you used this type of financing before? What’s been your experience? If not, what’s your motivation for doing so? Do you have any additional questions for me about the process?  Let’s talk in the comment section below.  Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you