Lenders: Where to Find the Money
T. Walker, letsdodeals.net
no substitute for cash in real estate investing, for lots of
reasons. In fact, the more deals you're involved in, the more
need access to cash - for operating expenses, deposits, down
payments, covering vacancies and utilities, remodeling costs,
even closing costs.
But what if you're starting out or just don't have any money?
out of the game? Absolutely not. What you need is the know-how
and the confidence to establish relationships and track records
private lenders. Not hard money, but true private lenders. They're
best-kept secret in real estate.
smart investors don't go near banks to fund their deals. They
don't use their own cash or credit. They get all the money they
from individuals....and get it faster and easier, with no limits
much they can borrow.
private money you're looking for is lower cost with no points,
relatively long terms - typically 2 to 5 years, puts you in direct
with the lender in order to build relationships and gain referrals,
allows maximum flexibility within the agreement if the need arises.
contrast, hard money costs more in points, carries higher interest
rates, is short term (usually for only 6-12 month periods), often
allow for direct contact with the lender, and usually has more
rigid terms -
especially if arranged through a mortgage broker.
they have their place, the high cost of hard money loans, coupled
with the need to repay them quickly, can often turn you into a
yourself - causing you to accept a less profitable deal than you
would if you could afford to wait. (Hint: that's why they call
it hard money.)
Where to find the cash
Private lenders are simply individuals that have money to invest
want better returns than they are currently getting. They are
abundant, and they mainly fall into four groups:
Your inner circle - small business owners, coworkers,
Busy professionals - doctors, dentists, attorneys, accountants,
insurance agents, and others with high incomes and very little
available to manage their investments,
People with lots of idle assets - IRAs, home equity, or cash,
Professional investors - the best source because they don't
educating, and they can recognize a good deal quickly.
Locate these people through advertising, direct mail, referrals,
research, the yellow pages, the Chamber of Commerce, or even your
real estate investor club (if you can get someone to share their
you. But be prepared, most won't.)
good to have more than one private lender in your pipeline, as
become fully invested and temporarily unavailable to you. Do your
and show yourself to be knowledgeable about the things that matter
as many of the details - choosing a title agent, providing documents,
exit strategy, etc. - as you can, in order to make it as easy
as possible for
your lender to say 'yes' to your proposal.
Cowgill is an investor who's made finding private money his specialty.
find a home study system, along with lots of information from
heavy hitters like Ron Legrand, Lou Brown, and Kathy Kennebrook,
Start in the 50K-to-200K range. Your lender won't be much interested
anything under 50K because the amount of interest to be earned
the effort. If you only need 10k to 35K to complete a deal, try
finding a second
deal and combining the two into one blanket loan.
Lance T. Walker publishes online regularly at "letsdodeals.net:
Helping you create a wealth-based retirement with an e-powered
real estate investing business." Free report, "Dare
to Double Your Income - Even During a Recession", available
online at millennium-wealth-system.com.