I am beginning to branch out from my personal investments and want to began approaching private lenders about investing with me. I currently have an investor but I think I will max out that source of funds soon and I want to keep growing. I have had multiple contacts over the years with friends of friends and family who may be potential investors. I have not pursued them very well as I did not really need them at the time. Now, I would like to put together a general proposal highlighting what I have done to date, general terms I can offer and currently available properties I am looking at purchasing. I am anticipating this will take the form of a 5-10 page booklet or pdf.
Question- Is this how I should go about this? Is there anything else I need to include in the packet? I want to be professional but also allow the relationship to develop naturally. I plan to invite them to see my projects or take them out to lunch. I don't plan to "cold call" anyone. I just want to put these out there in my network and let the numbers speak for themselves.
Also, if you are a private lender, can you tell me what your general terms look like? (interest rates, points, term of note, LTV etc.) Just trying to understand what the current market looks like in a big picture sense.
Thanks in advance for your input!
I wouldn't spend 5-10 pages if these are people you know. Put together a 1-2 page overview of your experience/successes, and then let the rest of the conversation by face-to-face. Unless they ask for additional documentation, you probably don't need it.
Personally, when I lend, it's based on the relationship. I lend to people/investors I know, so even the 1-2 pager really isn't necessary, since I probably already know their experience and successes.
Typically, my rates/terms are something along the lines of:
- 10-12% Interest
- 6 Month Term Interest-Only w/Balloon Payment
- 0 or 1 Points
- 1st Lien Position
- Investor puts in between 0-20% of the deal (depending on my level of confidence in them)
@J Scott Thanks, I thought I might be overshooting my target.
If I don't know much about the investor already I am unlikely to loan to them. When they approach me for the first time I expect honesty, a clear plan and, preferably, a back up plan or two. I will usually allow a potential borrower the chance to correct a misstatement. I will not ask more than once.
The better the deal, the closer it is to my farm areas (or expertise), and the more personal funds the potential borrower puts in, the more likely I am to make a loan to someone for the first time and the better the terms I am willing to offer.
I think a lot of lenders are more comfortable when the know they borrower has some decent skin in the game. The more you put down the better chance you have of getting approved.
Best of luck in all your endeavors.
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