Flipper/Rehabber · Spring Hill, FL · Member since 2014 · 234 posts · 132 votes
I really want to accelerate my business and use the BRRR method, problem is I need one of those coveted private lenders. I personally know several people who I can ask; present a business plan what have you, my question is what's the best way to approach them? What's worked for you? What not to do?
Rental Property Investor · Lindon, UT · Member since 2015 · 862 posts · 438 votes
10y
Focus on the transaction and the potential income for the investor you know. Most people that have money have money for a reason - they know how to spot a good investment. I wouldn't focus on the fact that this is your first deal, just focus on the deal and how it is going to work for you and for them if they will partner with you. It might take a little posturing to get the private lender you want to work with by acting like you know what you are doing.
Investor · Bossier City, LA · Member since 2015 · 55 posts · 21 votes
10y
Amanda,
That's a fantastic question and I'm curious to see what people say. I am working on private money as well, I'm developing my business plan over the next couple of weeks.
Investor · Daphne, AL · Member since 2014 · 1k+ posts · 242 votes
10y
I would not invest with anyone who asked me to do so, only with those I have decided to ask to take my money. Perhaps your market is different, but a track record is usually a prerequisite. Good luck.
Rental Property Investor · Lindon, UT · Member since 2015 · 862 posts · 438 votes
10y
Focus on the transaction and the potential income for the investor you know. Most people that have money have money for a reason - they know how to spot a good investment. I wouldn't focus on the fact that this is your first deal, just focus on the deal and how it is going to work for you and for them if they will partner with you. It might take a little posturing to get the private lender you want to work with by acting like you know what you are doing.
Investor · Portland, OR · Member since 2015 · 13 posts · 6 votes
10y
Great replies guys. I do have to agree, a proven track record is huge and likely a must see for private lenders. Unless they happen to be family or friends that trust and believe in your business plan. It's kind of a catch 22 as lenders want to see successful deals but we can't get these deals done without the working capital. It's a tough road to navigate but one we all must figure out. This is obviously only a piece of the puzzle. My advise is keep being persistent. Keep knocking on that door. Eventually it will open. May need a kick but if you want it bad enough. I'm telling you, it will open.
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
10y
Personally, I wouldn't ask anybody to invest their money until I'd already invested my own money in successfully the same way. Most private lenders won't lend on somebody's first deal, unless they are friends or family, and that has dangers of its own.
If you do pursue private money, don't ask them for money, present them the investment opportunity. If you don't feel comfortable presenting the opportunity, you could "go fishing" by talking about what you'd like to do as an investor, and how you know they have been very successful financially and ask how they would advise to get started. Even if you don't get the money, you'll likely get some good advise.
Be generous and not greedy with your terms ... focus on getting them a great return and getting you some great experience. Then, you can parlay that great experience into great returns for you once you have developed a proven track record. If they do fund, make sure they get paid back, no matter what, even if you lose money; reputation and relationships are more important than money, especially early on. Good luck!
Show them your track record, show them how you want to invest their money and show them what they will earn from it.
Offer to secure their position with a mortgage, ideally offer some skin in the game too with you taking the first loss. Spring hill jumped 10% I'd wager in the last 3 months...still decent numbers for buy and hold though i suppose.
Why aren't you looking to get your real estate license and do PM? Seems like you can get a lot more experience quickly if you start handling properties for other people. It puts you in touch with possibly people who "want out" and would be open to owner financing to you also.
From experience, i hate renting property, but i'm not against owner financing property to investors looking to cash flow it. I just don't want all the risk.
Why aren't you looking to get your real estate license and do PM? Seems like you can get a lot more experience quickly if you start handling properties for other people. It puts you in touch with possibly people who "want out" and would be open to owner financing to you also.
From experience, i hate renting property, but i'm not against owner financing property to investors looking to cash flow it. I just don't want all the risk.
Leigh C, I am very much considering that. Thank you!
Focus on the transaction and the potential income for the investor you know. Most people that have money have money for a reason - they know how to spot a good investment. I wouldn't focus on the fact that this is your first deal, just focus on the deal and how it is going to work for you and for them if they will partner with you. It might take a little posturing to get the private lender you want to work with by acting like you know what you are doing.
Thanks, not my first deal but would be my first with private money. I like your idea about presenting the deal, I'm also thinking of putting together a 'brag' book of previous deals along with.
Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 904 votes
10y
Amanda Young ,
The approach would depend on who the private lender is, whether they are familiar with REI, are they family, friend or professional acquaintance.
I have made several private loans and the most successful ones are ones where people did not push to have the money. If I wanted private funding, I would inquire whether the person does any real estate when I see them next. That's it, nothing more.
If they are into it, they will give some indication of their interest level.
Based on the interest level, I would then approach them at a later time to discuss the deal. Do not bombard them out of the blue, it may set off red flags.
Another approach is to see if your accountant knows any private money lenders. That's how I met a few that I lend to.
Hope it helps.
The book above I've given to accounts and re brokers and financial planners
sometimes it pays to get some joint venture partners in rehab, buy it, fix it and resell it, and have some money partners before you get private lending money for acquisitions
Real Estate Broker · Toledo, OH · Member since 2016 · 58 posts · 38 votes
10y
Some really good posts here. I have to caution anyone on using other people's funds unless they do have the experience and know their market very well. I recommend newbee's to start with a realtor license and really know how to use the resources it offers. Find out who is really doing well in your area and offer some time to help them and be a part of what they do for a few deals. Confidence is what helps you borrow funds and talk to people. When you are confident and excited about what you do then you won't even have to ask. The money just comes to you. I do a lot with different types of partnerships, my own money too, and borrowed funds from IRA's. Now I have so much opportunity that I have put together a private placement fund and will combine all the money into one investment fund. This was not an over night project. It has taken years to get to this level and many professionals that I learned from first hand. Not national speakers, not videos or books, just showing up when ever and where ever and doing it as a real estate broker first, then an investor. Working with people within my community that are really making good money, successful, and working honestly without taking advantage of people.
There is a guy in Springfield Ohio who publishes a guide with everything you need to know about raising and using private money. He's been the "go to" guy on the topic for years. His guide really isn't that expense.
I can't mention his name here even though I have absolutely no stake in anything he offers because the BP police will flag it, but just to a websearch for "private money springfield ohio", and you'll find it.