To get private money lenders, do I have to establish a real estate business first? Such as getting a website, business cards, business name, mission statement etc? I would like to do this part-time to meet my personal goals. I don't want to make a business out of it. Can I still use private money lenders? Will this make things more challenging?
Are you looking for private funding to buy real estate or to start a business?
I'm looking to buy real estate
Ok. None of those things are really relevant. A private lender is just like any other lender. They have their own rules and criteria for the projects they will invest in, but they won't be looking at websites and business cards.
Now, if you are looking at trying to raise funds with private individuals like friends and family, you might want to have a presentation package that will lay out the facts and figures of the project that you want them to help fund.
But, you don't have to worry about that right now. Find the deal first. It's easier to raise money if you have something tangible to present to people.
Will do! Thank you this was very helpful.
A private money lender is just someone you know or connect with. It could be a current friend or family member, a coworker. It could be also be someone you haven't met yet. Maybe someone you meet at a local REI meetup, or on BiggerPockets or somewhere else.
The requirements for this are up to you and the lender. Try to look at it from the point of view of the person who would loan you money. What would that person want to see in order to make a decision?
I'll second the advice from others, find a deal. If you have a good deal with a plan that shows how you'll pay back a lender and several exit strategies showing you've thought thru possible complications, then finding a lender shouldn't be a problem.
Thank you ! These are some good points to add to my private money proposal.
Most private lenders will require that the property be in an LLC.
Best of luck in all your endeavors.
@Anthony Dadlani but the property can't be in an LLC until after its purchased with private money.
@Tabitha J. When making the purchase , an LLC can be established and property purchased under that entity. The private lender will then be making a loan to the LLC with a lien on the property. Thats how most lenders work. In most states private lenders cannot make loans to a homeowner directly without a mortgage banking license. Hence when homes are purchased with an LLC its considered a business loan.
I hope that adds some clarification.
Best of luck in all your endeavors
@Anthony Dadlani yes thank you!
Many people recommend finding a deal first but real estate agents require a proof of funds. If I wanted to use a private lender but had not secured funding what do I tell the realtor?
@Sulaiman Shah you dont look for deals with a realtor. You find off market deals that no one knows about. An individual who is behind on his mortgage is very motivated to sell. He may not call a realtor. He will not ask for proof of funds. He will want you to buy his house, thats it. Right now is not the time to try to find deals on the MLS.
Do some direct mail, networking with other investors, buy some lists of pre-foreclosures, probates, divorces, etc. Send them letters or postcards. THAT is how you will find a deal.
@Rick Pozos Can I sill get these off market deals under contract without a realtor?
Why would you NOT be able to?? There is no law that says you have to use a realtor to purchase real estate. Or for that matter, you dont have to use a realtor to sell real estate either.
That means you have to quarterback the deal. YOU have to make sure that everything is good with your contract. YOU have to get the contract to the title company. And YOU have to make sure everything happens like it is supposed to.
It may be worth it to you or it may not be. It is for you to decide.
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