My local REIA had Alan Cowgill talk to us last month about how to get Private Money Lenders to fund your deal. This sounds great and it looks like most of the folks on the forums use PM but how do you find your first, or second, or third lender? I've been watching several YouTube tutorials and of course everyone talks about how easy it is, just like Alan did. I can imagine once you have your script down then getting a yes is easy but who did "yous guys" go to to get your start?
This morning I was listening to podcast episode 106 with Mike Sumsky and his recommendation was not to go through family or close friends - if I heard him right. Alan said he started with his Mama, which sounds like a safe place to begin. If I'm following Mike's advice I'm in luck since non of my parents or in-laws are in a position to write those kinds of checks. I can think of an Uncle that has been generous in the past and my colleagues from my old job, but would any of you call someone from years ago out of the blue and say "Hey! long time.... how's the family? you want to loan me $(fill in the blank)?
One more question while we are on this topic: Would you try to secure these folks before you find a deal so you know where to go to in a pinch? Or should you wait until there is a smoking hot deal that you need an answer right away? Kinda to help sweeten the deal and force a "yea or nay"
I had and still have similar questions as you do.
However, my first private lender was a friend of mine. I, first, secured a deal. Then started talking to people I know about the deal and that I need to raise money for it with such and such return for the investor. My friend had a line of credit with his bank and was glad to make a spread between what he would pay to the bank and I'd pay him. It worked well for both of us. My second deal was very similar and a friend was willing to lend me money for the deal and needed repairs. So my suggestion is talk to the people you know, let them know about the deal you have and how much money "someone" can make on it.
Hope this helps.
Talk with and share with those at your REIA. They are there for the same reason you are...to find deals and make money. The group I’m a part of has a time in the meeting called “Gets and Gots” which is where people pitch what they have or what they are looking for. Talk to everyone and ask if they know anyone who may be interested in your type of investment. More times than not the person you are talking to may be interested themselves. Then there is always Hard Money lenders and they are all over BP. Good luck
I never like to "ask" for money. It's hard to find private money when you have to "pitch"; most people don't like being sold something. Change your mindset from them doing you a favor by loaning you money to you doing them a favor by getting them better returns than they can find in traditional investments.
I like to tell everybody that I do real estate. When they ask what you do, you tell them what you do in real estate. Then at the end of it, say, "My friends and family wanted to invest with me, but they didn't want to be as involved as I was. We figured out how to do it and now they just invest with me and I give them a ___% return on their money."
It's like you're telling them about an opportunity, but not directed at them. If you add to it and say, "Hey, if you know anyone with money sitting in the bank that wants that kind of return, let me know." And maybe they'll say, "I know just the person... me!" And then you go on to tell them, "Well... we currently have all the money that we need in our projects right now, but let me get back to you when we have another deal lined up." Do this so that it doesn't feel like you urgently need the money, which would put you in a lower negotiating power (when it comes to finalizing the terms). And then a couple of days later, call them and tell them that you just found a deal that could work.
That's the high-level gist of it. If at any point they think you're selling directly to them, their defenses go up and you've basically lost them.
I haven't found much luck at real estate events and meet-ups. These people either want to be more actively involved or higher returns. Busy professionals (doctors, dentists, software engineers, etc) are who you want to target. Next time you're making small talk at the dentist, just let them know that you do real estate. It catches everybody's attention because most people want to do something in real estate.