Rental Property Investor · Member since 2020 · 11 posts · 2 votes
Just like the title says would you pay for a list of private lenders. I am trying to find a private lender to fund a deal I located in Florida and I have seen a few sites that require a fee to buy there list. I just don’t think it makes sense to me. But wanted to see what you all think.
No, I would not pay for a list of private lenders and nor should you.
If you want a warm relationship with private lenders, focus your energy on organically entering their orbit by borrowing their more expensive, higher interest hard money first and not messing that up.
Every hard money lender I know is a 0% interest private lender on an ARV equity split once you demonstrate you're not a moron.
If you want private money, first show you can be a stellar steward of their hard cash by:
(1) Making your hard money payments on time
(2) Establishing the term of the loan longer than you anticipate you need - versus asking for an extension (verify there is no penalty first).
(3) Not mistaking your lender for a project manager. They don't want to hear it. Lenders respect the borrower who understands they are (traditionally) strictly a fiduciary partner and not a therapist.
(4) If you need an extension, make the email one sentence, "Requesting a x month extension, with x terms, due to x.
Demonstrate you requested a borrow term that accounted for your DKWYDK (don't know what you don't know) scenario versus multiple extensions. While they make a lot of money on your extensions (assuming they'll give you more than one), it also shows them you're amateur hour if you can't confidently anticipate the scope of work. This does not make them want to do an equity split with you down the road because anywhere they park interest free money for longer than it needs to be there means they're not making high interest money elsewhere. This is the net profit flip spread aside.
If you can do all that, once you land the unicorn deal, make them your first call on a private lending pitch.
Do not expect private money on a crappy deal
While unpopular, I don't borrow from friends and family - not a fan of the dynamic it creates.
Rental Property Investor · Columbia, SC · Member since 2020 · 302 posts · 186 votes
5y
So if you mean actual private lenders (vs hard money lenders which are very easy to find) the honest answer is networking. Go to Reias, tell people what you are looking for, call friends and ask for them to invest with you, that is how I have done it in the past.
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
5y
Hey @Dan Auciello the ONLY way you are going to find private lenders is by doing deals with hard money lenders first. You have to have a track record before friends and family are going to trust you with their hard earned retirement money or their cash on hand.
If you had worked hard to save up 250k cash in the bank, would you lend it to your cousin or nephew who one day said, "I think I want to be a real estate investor. Uncle, can you lend me half of what you have saved up all your life for?"
Maybe.
But he better have one hell of a deal. He better have a passion for real estate. He better know a little about construction. He better know other people who are involved in the real estate game that can help him along the way when he stumbles. AND he better have done this at least once or twice to prove that he can do it AND make money.
Investor · Bethlehem, PA · Member since 2016 · 929 posts · 951 votes
5y
@Dan Auciello I would exhaust a few free options before paying for a list. Google search, real estate meet-up groups, ask your agent(s), search through BiggerPockets...
Hey @Dan Auciello the ONLY way you are going to find private lenders is by doing deals with hard money lenders first. You have to have a track record before friends and family are going to trust you with their hard earned retirement money or their cash on hand.
If you had worked hard to save up 250k cash in the bank, would you lend it to your cousin or nephew who one day said, "I think I want to be a real estate investor. Uncle, can you lend me half of what you have saved up all your life for?"
Maybe.
But he better have one hell of a deal. He better have a passion for real estate. He better know a little about construction. He better know other people who are involved in the real estate game that can help him along the way when he stumbles. AND he better have done this at least once or twice to prove that he can do it AND make money.
This is a phenomenal comment. I've consider private money lending for my friends, but only if the LTV is somewhere in the 60% or less range. Building up a track record is key!
Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes
5y
How much does this list cost? $50? Sure, why not. $5,000? Eh...probably no.
A wise mentor told me once, "Any time someone tells me they want to get into real estate, I tell them first take a $100 bill, walk into the bathroom, and flush it down the toilet. If you're not prepared to do that, you're not prepared to be a real estate investor."
His point wasn't to waste money on purpose; the point is that when you get started in this game you're going to make a lot of mistakes which will end up costing you money. So prepare yourself for that mentally and physically. Let's say you spend $100 on a list and it goes nowhere. What will you have learned? Will you find any value in it whatsoever, even if you don't make a single contact?
When I got started in the game I held a real estate license. A lender and I teamed up to do a presentation for first time home buyers. Rented a small hotel conference room. Great turn out! 50+ people. How many sales did I get out of it? Zero. How many loans did the lender get? Zero. What was our total out of pocket? About $200 each. What did we learn? That this was not an effective strategy? No...that wasn't it....we both knew people who had done it before and gotten several leads. Our problem was some days you go fishing, and in spite of the best you do, you still get skunked. Get over that fear of getting skunked as quickly as possible. Don't go crazy. Notice my mentor didn't say flush ten $100 bills. Just enough to get you past the point where the fear of small losses causes you to freeze up or dither.
The list might be nothing....or it might be a gold mine. We simply don't know because we haven't see or worked the list. Try it. If it's stinko, oh well. You'll also be networking. Maybe that will get you the "hit" you need. Hopefully, you're also establishing an online presence and social media contacts. Handing out business cards to everyone you meet. Telling family and friends what you're doing.
Try 10 things: if one of them works you will more than recoup your time and money.
No, I would not pay for a list of private lenders and nor should you.
If you want a warm relationship with private lenders, focus your energy on organically entering their orbit by borrowing their more expensive, higher interest hard money first and not messing that up.
Every hard money lender I know is a 0% interest private lender on an ARV equity split once you demonstrate you're not a moron.
If you want private money, first show you can be a stellar steward of their hard cash by:
(1) Making your hard money payments on time
(2) Establishing the term of the loan longer than you anticipate you need - versus asking for an extension (verify there is no penalty first).
(3) Not mistaking your lender for a project manager. They don't want to hear it. Lenders respect the borrower who understands they are (traditionally) strictly a fiduciary partner and not a therapist.
(4) If you need an extension, make the email one sentence, "Requesting a x month extension, with x terms, due to x.
Demonstrate you requested a borrow term that accounted for your DKWYDK (don't know what you don't know) scenario versus multiple extensions. While they make a lot of money on your extensions (assuming they'll give you more than one), it also shows them you're amateur hour if you can't confidently anticipate the scope of work. This does not make them want to do an equity split with you down the road because anywhere they park interest free money for longer than it needs to be there means they're not making high interest money elsewhere. This is the net profit flip spread aside.
If you can do all that, once you land the unicorn deal, make them your first call on a private lending pitch.
Do not expect private money on a crappy deal
While unpopular, I don't borrow from friends and family - not a fan of the dynamic it creates.
Rental Property Investor · Member since 2020 · 11 posts · 2 votes
5y
Thank you all excellent advice from everyone one. Whether it’s the metaphor of flushing a 100 Bill down the toilet (loved it and made total sense) to building relationships. Well worth it from everyone.
I would not pay for the list. They will likely ask how you got their email or phone number and that leaves you having to disclose they were part of a list. Use this site to network instead :-)
New York, NY · Member since 2016 · 53 posts · 33 votes
5y
@Dan Auciello
Had the same problem when I started to invest in Charlotte. Couldn’t find the right lender(And I have strict criteria who is “the right lender”. No credit check, no appraisal, can fund in less than a week).
It took me 2-3 weeks, I asked for referrals from wholesalers, local investors Facebook groups and BP members.
Eventually, I found two. One of which was very carful and needed too much money down(out of state lender) and one that is an absolutely blessing and I am grateful to have(local private lender who knows the area).
My recommendation:
Don’t spend a minute with out of state lenders.
Make it your “one thing” this week get 20 referrals. You will find one.
Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 729 votes
5y
It depends on who you get it from. It takes a lot of work to keep it updated. I have a database of 250 lenders, 7 totaling 24,000 family office and hedge fund managers and another with 10,000 accredited investors. This is a full time job for my VA. Some will stop lending or investing and it's pointless to approach them, some are in specific sectors or states even. So it makes it necessary to have someone dedicated to keeping track.