Investor · Canton, OH · Member since 2015 · 116 posts · 20 votes
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...
Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
11y
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.
Houston, TX · Member since 2015 · 17 posts · 4 votes
11y
Others above had great ideas for networking for private money, can't really add to that. As Jay mentioned, a good HML company is a big asset. I sometimes borrow HM at 12% with a five year balloon. I usually pay those loans off in 2-3 years. At that rate, buy and hold still works well. Best of luck sarah :)
Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
11y
If you are looking for money, there's something much bigger off than you not having money. Money is constantly looking for home, @Sarah Miller, and if it's not finding you, then the problem is...you :)
So - if I wanted to place $50,000, why would I give it to you?
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
11y
Not much to add from me, except it gets easier. I have acquired access to more private money and lenders than I need or want just by being in the biz a while. Network and be 'reluctant' to allow someone in. I wouldn't do HML personally. I am in RE for the freedom. If I wanted someone to have to report to and beg from with strict deadlines, I would get a job. Not to mention the high costs. Thankfully our BP co-founder had a 'partner' at home to save him from his first HML. Would have buried him before he got started. Not trying to be a downer-defeatist, just know the risks before you play with HML!
Investor · Canton, OH · Member since 2015 · 116 posts · 20 votes
11y
Thanks for the input @Ben Leybovich. I am still in the very beginning stages of even learning how the private lending situation can work. I have 1 private lender but its a family member and they really don't have much more they can do. I've gotten to the point of having 2 properties about to close and haven't even been doing this seriously for 3 months so I'm trying to figure out how to keep going.
Investor · Canton, OH · Member since 2015 · 116 posts · 20 votes
11y
Wanted to ask one more question - just finished up the webinar with @Brandon Turner. (THANKS!!) @Ben Leybovich@Dell Schlabach and anyone else. Do you secure a purchase agreement first and THEN go find a private lender for the deal? I can't imagine any seller would accept an offer without proof of funds first. Or do you just present a possible deal to an investor hoping it doesn't get scooped up?
Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
11y
It's harder than it Brandon makes it sound. He alluded to this - credibility gap. If I told you that money is sitting and waiting for me to have a deal, I wouldn't be lying. Money trust me because I have a track record. So, now - money is waiting for the deal. But, early on, the deals came first. For you - the deal comes first!
Finding private money is a bit like learning anything else, its hard before it becomes easy.
Today, anytime I find a good deal, I make the offer, write the contract, "confident" that the money is available even when nobody has agreed to fund me yet.
In the early days, I did numerous hypothetical scenarios presentations to potential private lenders, using listing printouts of actual sold properties, real comps, with summary sheet of ARV, expenses, pruchase price and profits. . I would meet with individuals who I thought might be interested, showed them a basic presentation. I would ask, if I come across something like this again, would they be interested in funding/partnering.
If you are looking for private lenders such as friends or acquaintances, you may find it helpful, less pressure on both sides if you run potential scenarios past them to get a sense of their interest and ability before you are under pressure to close an actual deal.
However if its a screaming deal, you can always find the money if you talk to a few people who know a little about real estate.
In the early days I did my list of 20 people, forced myself to write down the names of 20 people I knew who I thought would have the money, ability to do a deal. I never had to call all 20 before I found someone to fund.