Real Estate Agent · Lexington, SC · Member since 2016 · 9 posts · 0 votes
I am just starting my career in Real Estate Investing. What is the best approach when seeking private money lenders? Any advice would be appreciated! Thank you!!
Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
10y
Private money is a relationship business. Tell everyone you know what you do and how you can help them achieve good returns secured by real estate. Be patient. When you find a private lender treat them better than you promised.
Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
10y
Private money is a relationship business. Tell everyone you know what you do and how you can help them achieve good returns secured by real estate. Be patient. When you find a private lender treat them better than you promised.
Vendor · Katy, TX · Member since 2015 · 390 posts · 218 votes
10y
@Caroline Hires Just a thought, from an online marketing perspective, I googled "how to invest 100k" and didn't see any top-of-page advertisers - you might bid on that keyword (or similar), create a short landing page making the case for why investing in real estate with you is a good idea, and how to contact you to chat at the local Starbucks. Maybe not the best first step, but it's a good idea at some point. Also, I'm a marketer, not a real estate investor, so you probably want to start the way @Jeff Rabinowitz said. :)
Lender · Los Angeles, CA · Member since 2009 · 1k+ posts · 2k+ votes
10y
With respect, private money is not a commodity item like a book or laptop that you can buy online, and perhaps enjoy the protection of a credit card. This is a relationship business, as @Jeff Rabinowitz correctly states. The best way to find credible lenders, who understand real estate and lending in your area, is to attend a few local real estate clubs. Here are a handful in your community that you might consider.
There are many threads here on how to vet a private lender, which you might also do a search for. These will give you an idea about what to talk about. More important at this point, is to meet as many lenders and other investors as you can, large and small.
Unlike borrowing from a bank, you'll find everyone has different criteria, which might fit certain deals and not others. You'll also find you're comfortable with some individuals and not others. Plus, since you are new to this business, you see that some will work with you and some won't until you get some experience. You're safest to do all of this eyeball-to-eyeball, Caroline.
Private lends or HML, whatever you choose to call them, provide the funds. YOU have to have a solid deal for them to risk THEIR money. Most want some skin in the game. You will find rates and terms vary widely. Some may claim very low rates, etc but when the time comes they don't fund the deal. Find one or two that are trustworthy and stick with them. There have been posts on BP where the day before closing, the lender "changed their mind". That puts a buyer in a tough spot. Find a deal, KNOW your numbers, KNOW your exit strategy, and then present it. Generally PML or HML loans are not advisable for buy and hold. If you can find friends or family that will provide inexpensive funds to buy and hold take advantage of it. They will or should be 1st lien position. If you have any questions you can PM me.
Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
10y
@John Thedford, I disagree. I know investors who have private money financing on their long term holds at 7% for 5-10 years. Sometimes those lenders financed the entire purchase. They often do not want their money back but prefer to keep it deployed. It all depends on the people you meet and how you can align what they want with what you want. If the lender trusts the borrower and the borrower honors that trust, the possibilities are nearly limitless.
Sure Jeff...that is why I told the OP rates and terms are all over the place. I have private money guys at 6% that LOVE it. I have others at 7% that only want to do 3 year terms. It does boil down to relationships, trust, and the lenders determination of the borrowers credibility, knowledge, and stability. Jay Hinrichs proposes the 3 C's in lending and they are good rules for all lenders to consider no matter who the borrower is.
Real Estate Agent · Lexington, SC · Member since 2016 · 9 posts · 0 votes
10y
@Jeff S.Thank you for those pointers, the link to the various clubs in my area is so helpful! I have already RSVP for the Real Estate Investing Meeting on Sept 27! Thank you again!
Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
10y
I haven't seen that post of Jay's (his posts are usually spot on) but you will often see the 3 C's, the 4 C's or the 5 C's. They 5 are: Character (reliability, integrity), Capacity (sufficient income or cash flow to service the debt), Capital (the borrower's net worth or how much of their own money they put into the deal), Collateral (the value of the assets that secure the debt), and Conditions (the borrower's situation and the state of the economy or local real estate market). All are important but different lenders will weigh different aspects differently for different borrower's, different deals, different situations, and at different times.
Vendor · Katy, TX · Member since 2015 · 390 posts · 218 votes
10y
@Jeff S. And with the same respect, millions of dollars are spent online creating relationships that generate money. Unless you've tested this and proven it doesn't work, it's irresponsible of you to tell people it doesn't.
Real estate investment training is not a commodaty like a laptop or a book, yet hundreds of companies are spending hundreds of thousands a month advertising online to potential club members (I know this from years of direct experience doing this very profitably for clients).