Private money is the Holy Grail for Real Estate Investors in these challenging economic times. With banks stiffening credit guidelines and limiting their loans to only 70% to 80% of the property's purchase price, private money lenders are needed to fill the gap.
And even for the subject to investors, they may get a "free house", but the funding for rehab, minor fix up, holding costs (while trying to get a buyer or tenant), etc. demands private money, unless they want to rapidly deplete their own bank accounts-and that's not a sustainable business model
As for rehabbers, it used to be that they could tap in hard money private loans for 60-70% LTV from hard money lenders. Now, even hard money lenders are looking more closely at credit, and the real estate investor had better have private lender funds for back up, in case he goes over budget or needs money for interest payments.
There is clearly enormous wealth-building potential with real estate investors able to pick up properties for $0.20 to $0.50 on the dollar from desperate homeowner and lending institutions needing to unload hundreds or thousands of REO's. All one needs is the money!
So, how can we find these private investors? And more importantly, how does one convince these potential private investors to make a private investment of $10,000's or $100,000's in your real estate project?
Now, if you want to raise a lot of private money, you have to be speaking to High Net Worth individuals with $millions in assets and the desire to invest it in a new venture. Whether these people are friends and family or whether they are accredited investors or Angel investors that you may not know, they share some common attitudes about money and investing.
So, if one understands the private investor's attitudes, and can enter that conversation, the only thing left to do is to ask for the check and start putting that private investment to work.
There are 5 Key Secrets the real estate investor needs to learn and understand, if he or she wants to be successful in borrowing private money for real estate. My colleague Bob, uses these secrets to buy nice homes in bulk (10 at a time), and turn them over for 6 figure profits. Simply put, without utilizing these 5 key secrets, no catchy phrase or elevator speech is going to bring the desired success.
Remember, private lenders are not motivated like homeowner about to lose their house. Nothing bad happens if the private lender doesn't invest his money.
WIIFM stands for "What's In It For Me?" A private money lender is going to expect an extraordinary return on his/her investment compared to their other options. And the story, to put it bluntly must excite the private investor's "greed glands".
The 2 ROI's: As Will Rogers once said, "I am much more concerned with the Return OF my Investment, than I am the Return ON my investment. The private lender needs to have confidence in your exit strategy that will get his money back when promised.
Risk-Reward: Private Lenders of money got to be wealthy by being very careful about the amount of risk they would accept for any investment. So, unless you structure your private offering so that the risk is acceptably low relative to the reward, your chances of getting the money will be slim.
Credibility - this is a stumbling block for many real estate investors as they struggle to answer the private money lender's question: "why should I invest in you?" And here is the great secret: It's not about you, it's about your business! Learn how to structure your business so that it brings you credibility even if you have little real estate experience.
Trust - Ultimately, if you want that private money, your private lender must feel that you can be trusted to do what you say. With friends and family, one may have a head start on this. With private money lenders who have a more distant relationship, you must invest the time into building that trust.
Author Resource:-
We help real estate investors find Private Money
Lenders to fund million dollar private mortgage investments in their real estate deals (in business 10 years). Go To www.InvestorWealth.com
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