How to Raise Private Money for Real Estate Deals: 3 Basic Steps

Boy you can’t swing a dead cat around without hitting an investor who is looking for private money these days huh? To be frank – I’m getting kind of bored hearing so many investors tell me this same problem over and over again. The scariest part is that some of these investors are brand newbies or they don’t have any deals what-so-ever to offer a private money lender. Come again?

Now I don’t mean to sound so grouchy about this subject, but raising private money is no different than finding deals and finding buyers. It’s work work work! When I ask investors what they are doing to “raise private money” I am getting pretty much the same answers… which is not much. Now call me crazy, but if we aren’t marketing to folks who may have money to lend us – then how do we expect to Raise Private Money? Or if our only form of “advertising” is going to be real estate meetings where other investors are looking for money too – good luck. No my friends, this simply won’t do.

The only way that I know of to raise money successfully is to advertise for it. And by advertising I mean YOU are the advertisement! Marketing non-stop, all the time, telling everyone you know (outside of your investor world) in some form or another. Just like you would be doing to buy houses and to find buyers.

In a nut shell, to raise private money:

1. Tell everyone you know that you are a real estate investor and tell them about your real estate investing business. Tell your neighbors, your friends, your family, your Doctors, dentists, lawyers, plumber, every new person you meet… everyone! When you start with this -people inevitably are going to want to know more about what you do.

When you get to the point when you have a deal or two or five under your belt – then move on to a whole marketing campaign on Raising Private Money. This is what I do now. I send out direct marketing to folks ( I bought a list from a list broker) letting them know that I can teach them how to earn 8 – 12% on their money by being a Private Lender. Just like I do to find sellers of homes. I send out direct mail saying that I can buy their home. Just like I am about to do to find buyers – market to them!

2. Have deals to tell people about! Duh… this is a no-brainer right? Well I am surprised when I ask investors if they have deals already in place to offer a private investor and they say No. (Or worse, they are not even currently marketing for deals.) Wowee Kazowee.

It is a two fold operation that must be happening at all times. Talking to everyone you know who might have money – either in the bank, in a 401K, in a pension, stuffed in their mattresses – and getting deals all the time.

3. How do you have deals all the time? Market, market, market. How can an investor be worried about raising private money if you don’t have deals to talk about? I hear it all the time… “well I don’t want to find deals if I don’t have the money to buy them”. This is the wrong attitude all together. When you have really good deals – you will find the money or the money will find you -period. Notice that I said – “good deals”. I have had my own experience of having a hard time finding money for deal or two. I recognize it was because they weren’t good deals after all! Just because we know of a property that is for sale – doesn’t mean it’s a deal. Oy – I get shivers down my spine at the hard lessons learned there… Rule #1 – know your business!

Now – Raising Private Money is a whole workshop in itself. But the bottom line is that we must work our real estate investing business all the time. Finding private money is a lot of work. But this whole business is a lot of work. If you want deals – you must work hard to get them. If you need private money, you must work hard to find the people who might be interested. If you need buyers – you must work hard to find them. It’s not brain surgery – but it is hard work. (Did I mention it is work?)

If we don’t do all of this, all the time, then forgetta ’bout it. Find another hobby. This business is not for you.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.