Like many real estate investors, I started out investing in real estate using my own money and credit. This worked fine for the first few deals. But eventually, as I purchased 20 to 30 properties, my lender at the time, Washington Mutual, cut me off from further deals and my personal funds dried up. I had built up a great deal of real estate equity, but was locked out from doing other deals with my traditional lender and could barely pay for my own groceries.
I had to find another way to fund real estate deals or
my investing career was over.
This is when I discovered private lenders who have funds to lend for real estate deals, but do not want the headaches and paperwork to actually manage tenants or properties. These individuals are generally middle class people, like you and me, who have some extra funds to lend. They can be retired business people, corporate executives, professionals such as doctors, lawyers, or business owners or even blue collar workers all looking for returns substantially above the 3% to 5% they get at the banks.
Let me first explain my definition of "Private Money". Private money is funding that comes from private individuals, friends, family, IRA's or any source other than institutional or conventional means. It is sometimes referred to as "Hard Money" or "Flash Cash."
The question I had to figure out was, "How do I find enough of these folks to run an active real estate business buying 2 to 4 houses per month$%:" To address this issue, I developed a marketing plan that would allow these individuals to call me and raise their hand to indicate their interest in our lending program.
How Do I find Private Lenders$%:
Well, frankly, we advertise for them. It's as simple as that! Finding private money is not nearly as difficult as people think. My simple marketing plan includes many of the following activities:
Network with everyone you know and develop a 60 second "Elevator Speech":
"Are you getting a safe 9 to 12% return on your idle cash or retirement funds$%: No! Well, we buy houses and pay cash for each house and we use private lenders to fund our deals. We pay 9% to 12% on notes secured by local real estate. If you are not getting that type of predicable return on your money, I'll be glad to get you the details. We occasionally hold a free small luncheon for potential investors, or I could also sit down with you at your convenience and show you how it works. If you like what you hear, simply let me know how much you're looking to invest and how long you can have your funds tied up. I'll put you on my list and look for an investment opportunity that meets your needs. When I find one, I will call you. At that time you can pass or play. There's no obligation."
Newspaper Ads such as Private Money Needed, Earn 14% plus 5 points, Rental, 70% LTV $65,000 call xxx-xxx-xxxx or Mortgage Note for Sale: $190,000 1st mortgage at 9% with low LTV. Call xxx-xxx-xxxx
REIA Newsletter and CraigList Ad:
PRIVATE LENDERS NEEDED - Earn 9% to 12% hassle free on your idle cash or retirement funds secured by local real estate. I'm a professional real estate investor with over 50 successful transactions completed since 1999. I am not a financial planner, but a full-time buyer and seller of single family homes. We use private funds to pay cash for our real estate purchases and can pay you 9% to 12% when you help us fund our purchases.
To learn more visit us at or call me at xxx-xxx-xxxx. Invest by xxxx 31, 200x and earn a $1,000 bonus.
Flyers, Postcards, and Speeches/Presentations: We also use flyers and postcards with a similar message using the above examples. Also, one of the best ways to get private lenders is to speak or present to groups. Senior citizen groups are always looking for presenters to attend their meetings and these people quite often have excess cash in CD's or IRA's that make them a natural lender.
Having private capital resources is critical to the success of the serious creative real estate entrepreneur. Even if you desire to use your own money, it never hurts to have another source or two available. If your funds are tied up, and a great deal comes along, you can immediately jump on it.
If you follow some or all of the above marketing suggestions, you will have people with money seeking you out to lend you money for your next deal.
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