HOW do I find private lenders?!?! Please help...

33 Replies

Hi!  Is it possible to contact a financial institution who does SDIRAs and ask them to reach out to their clients about possibly investing in real estate? 

I am really struggling with HOW to find private investors!! 

Do I find a property I like first?  I can't possibly get something under contract without first showing proof of funds -

So I thought maybe I could have a few private lenders lined up, go find a property I like, take it back to the few possible lenders I might have and then get a commitment which would then allow me to make an offer...

Network network network.   Local reia meetings might be a help.  You can't really advertise for private money.   Have you considered hard money lenders?

@Greg Behan

 How do hard money lenders work?  I haven't really looked into them because they sound sketchy to me...

Best way to find Private Lenders is Google Hard Money or Private Money in your City, County or State and you should find a bunch.  I'm a Private Lender myself and my company does Private Lending - in California only though.  From what I've found is, you just need to make sure that you find a Private Lender that is not going to charge anything up-front.  They should be like any other lender and when Escrow closes they get their compensation.

@Sarah Miller , I work up in Akron flipping houses, and I have worked with a guy I met on BP, @Dell Schlabach .. he works all over Northeast Ohio and he has experience with private lenders in the area.  He would be a good resource.  I also interviewed him on my podcast about flipping houses a few weeks ago!  If you're interested, there's a link in my signature.  It's Episode 3, I believe.  

@Jared Lichtin & @Don Harris

 Thank you for the advice!  And thanks everyone else.  I have tried googling private and hard money lenders but I am not sure about the process of these and how to know a sketchy one.

How do hard money lenders work?  I haven't really looked into them because they sound sketchy to me...

Hard money and private money are very similar. The main differences being that hard money comes from an institution as opposed to a private individual. Private money is a bit cheaper (usually 4-5% less), and harder to find (requires good networking skills).

Most hard money lenders have a brick and mortar location and should be fairly easy to find. Like others have suggested, use google or under the resources tab here on BP there is a directory.

If you need fast funding and don't have a private money source, I'd say hard money is the way to go.

@Matthew Nixon

 What if I don't have much money to put down of my own cash?  I'm already acquiring 2 other duplexes so I'm about washed out on cash.  Can I have my cake and eat it too?

@Sarah Miller

With out knowing a whole lot about your situation I'd recommend holding off until you can build up reserves for another down payment. Leverage is great when used responsibly. If you get over-leveraged and the market takes a dip, that's when you can get in trouble. My 2 cents. Good luck.

There are at least two others in the area that loan hard money.  I know they have money right now!!! One comes to the SCREIA breakfasts on Wednesdays.  @Sarah Miller

@Sarah Miller

With out knowing a whole lot about your situation I'd recommend holding off until you can build up reserves for another down payment. Leverage is great when used responsibly. If you get over-leveraged and the market takes a dip, that's when you can get in trouble. My 2 cents. Good luck.

I don't know that I totally agree with the description of hard money vs private money that @Matthew Nixon gave.  

In fact, I don't agree with many descriptions of hard money that you'll find on BP and elsewhere.  And to make it more confusing, it varies greatly by region, so what may hold true in CA might not be the case at all in OH or MA.  

Hard money by definition is a loan based on a hard asset. Real estate is the hard asset. It doesn't mean hard to get or hard to deal with. So a hard money lender is making loans based on the value of the asset, and not on someone's credit score or DTI.

You can have sketchy people lending money and calling themselves hard money lenders or private money lenders.  In fact, most of the hard money lenders I know are not institutions, most are simply straight up business people.  A few are sketchy.  A few real estate investors are sketchy too. A few mortgage lenders are sketchy.  A few contractors are sketchy.  And on and on.  

My point is, it doesn't matter what you call it, it pays to ask around and do your due diligence.  Look for lenders local to you, and look for local references.  If they are highly regarded locally, you can speak to other investors who have done business with them.  

@Marcy Albrecht I do want to try to come one of these times but I work through the day so I have to get off one morning to come!

Thanks everyone :-).  Hopefully I can continue growing since I've already gotten a great start!

@Sarah Miller

I'm from MA and funded my first flip recently with a HML that we are hopefully closing on this week or next : ) that being said, he's not sketchy at all, actually, I've grown to have a great relationship with him over these past few months. I've learned more and more that real estate is a life long game and patience is key. Baby steps but what I did and what seemed to work for me is.

1.) Attend as many local REIA's as possible. There are many people that can help fund deals from HML to brokers whom will be willing to sit down with you and give you their success stories, what they've done, who've they worked with and so on and so forth.

2.) Don't be shy. If your an introvert by nature, blast some music in the car before you go into these REIA's and tell yourself your going to talk to everyone and at least introduce yourself and ask what they do and what got them attending REIA's. Conversation brews and then you can start asking them how they funded their deals. Just by practicing this you'll likely run into someone that lends money, and you probably don't even know it.

3.) Have a clear plan and be professional.  Know your numbers.  No lender will lend money to someone they don't trust and won't lend money to someone that they believe is a risk, even if you aren't.  This is where your persona comes into play and your ability to build rapport.

4.) I enjoy @Ann Bellamy 's comment on sketchy people. Sketchy people exist everywhere, it's up to the individual to define what is sketchy in their eyes. You can't just label a class as sketchy or all HML's as sketchy. Read up on it, attend local REIA's and ask about it there are many success stories with it. It is on you to really understand the in's and out's, if it would work for you, and develop relationships with HML's whom are clearly "not" sketchy. If you really still concerned or overwhelmed with a lot of the knowledge that comes your way because you might not be familiar, talk to a RE lawyer you trust.

Basically, the more you network, the more you build rapport and the more you build trust among peers, the longer and wider the road to success will be.  You're bound to make mistakes, everyone does, just at the end of experience take a look back at what you did, what you could do better, and what you are going to do better in the future.

Good Luck!

Kyle Cabral, Real Estate Agent in MA (#009535674)
(508) 264-4698

@Sarah Miller We have used a dozen or so private money lenders to fund rehab deals, we are using four currently. Two of them do one deal at a time, currently 80% of our deals are funded by two individuals.

Most of our the private lenders came from friends and business relationships, a lot of networking and sharing with everyone what we are doing in the beginning. Most private lenders will start with one deal, if that one goes well, they  can likely do two at a time maybe more, and they have friends and acquaintances they will refer as well, if you take good care of them. 

It is not easy for most people to get 10% return on their money without high risk, while at the same time for most real estate investors 10% is relatively inexpensive short term money.  There is a lot of money available looking for deals from, solid borrowers. 

There is a local bank,portfolio lender, that loves to finance real estate deals for investors with w2 income. They are pretty good about refinancing cash flowing properties as well, so you have a number of options. I notice at least two other people on this thread that have/or had private money available to lend to investors for real estate deals. So have coffee with the locals, and the ones from carrollton  :-) they can probably help, or connect you with the people who can. 

(330) 432-6927

Sarah, A lot of GREAT comments have been posted.  NOT sure what your trying to do, wholesale or fix and flip, if your wholesaling, WHY do you need private lenders? if your wholesaling then no private lenders are needed.

You are in Canton, OH, Do a little research in your area for some, talk to a few realtors, there is a "BIG" private lender in Canton, many millions available, that's all I can say on here. although the numbers MUST be right or he will tell you it's not a good deal. It works like this, you present him a deal, he will then tell you to go get it under contract, also provide proof of funds that anyone, like a seller or a realtor can call him to verify.

If it's not a good deal for YOU he will tell you not to do it.

  

Originally posted by @Ann Bellamy :

I don't know that I totally agree with the description of hard money vs private money that @Matthew Nixon gave.  

In fact, I don't agree with many descriptions of hard money that you'll find on BP and elsewhere.  

I would have to agree. 

My primary lender, although most people refer to him as a hard money lender, I consider him a private lender, we have become good friends over the years and I have been able to reduce our interest rates by more than half of what we were paying four years ago. This is due to the fact we have become more experienced, more stable thus reducing his risk, providing quicker turn around cycles and w now have better assets securing the funds.  

(330) 432-6927

@Sarah Miller heres a guy @Jared Lichtin I would suggest buying lunch or coffee, he is a joy to hang out with, talks faster than I do. He is in akron. Young ambitious, retired attorney who just quit his legal work to do real estate investing and real estate training full time.

A guy to watch, hes going to go far. Get to know him while hes still willing to share his knowledge for the price of a good meal, before he starts charging 20,000 for a boot camp. 

(330) 432-6927

@Sarah Miller

a very good HML is invaluable and can be a great partner for many years... think of them as your capital partner if there is money in the deal then do it..

If you have the juice to borrow from banks then your ahead of the game other wise your HML is your capital partner and you should look at them as such..

Originally posted by @Sarah Miller :

@Matthew Nixon

 What if I don't have much money to put down of my own cash?  I'm already acquiring 2 other duplexes so I'm about washed out on cash.  Can I have my cake and eat it too?

Yes and with icing on it if you find the right lenders. If you refinance the duplexes you can reuse that cash for down payments.

If the deals are good enough, locally you can get private and some hard money to fund purchase AND rehab until you refinance with a bank. I am aware its not typical, but all our rehabs with private money loans for rehab deals are funded at 100% of purchase and rehab up to a max of 80% of ARV.

(330) 432-6927

@Tim Mitchell Thanks for the tease lol.  I will be working on my networking once I close on my current 2 properties.  I'm a numbers person too (finance degree and MBA) so maybe I could get along :-).

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