Every real estate investor I know is always looking for new and exciting ways to fund their real estate deals. A lot of investors do not have the millions in cash they need to do as many deals as they would like. So what are the ways to fund real estate deals? There is subject to/owner financing, Cash money and credit cards, bank financing, lines of credit, hard money loans, self directed IRA’s and private money.
Everyone should figure out how they can use all of these funding techniques and how to leverage what you have. Now what if you don’t have good credit, very little cash, cant get a loan, have no IRA. So what do you do to get your deals funded? You go with private money and private investors. There are hundreds maybe thousands of private investors out there looking for places to invest their money. They all have found out in recent years that the stock market sucks. Private investors are out there looking for new places to get amazing returns on their money. These people have piles of cash just sitting around waiting for you to come along. They are the perfect people to fund all of your deals.
Benefits of Private Money
- No banks or hard money fees
- Better terms, you give them 8-12% return on their money
- Speed of funds. You can get the money today if you need it.
- No application process or credit check
- 100% financing
- No limit on the amount you can borrow. You can have hundreds of people funding your deals
- Everything is negotiable
So how do you get Private money investors beating down your door?
What you first need is to put together a credibility packet. This is what you will be giving to investors which talks about your company and how giving you their money will be the best decision they will ever make. You should include your company summary/description, case studies of projects you have done, investor program description, ansewers to some frequently asked questions, and a few business cards. Now you may be saying I don’t have case studies, and what is the program. Don’t worry I will explain the program and for case studies I would suggest you buddy up with another investor who has done several deals and ask him if you could use some of his case studies.
You want to paint a picture to these private investors of what you do. Most people do not know actually what real estate investors do. Ask them have you seen the show flip this house? or one of those HGTV shows where they fix up and sell houses. Make sure they understand what you are doing. You are buying cheap houses, fixing them up and selling them at a profit.
Private money program
- 8-12% Annual Simple Interest Rate
- 6-12 Month Term
- Principal and Interest payable at sale
- Secured by Subject property. Private money lender owner on title
- Lender gets the mortgage deed of trust to protect interest
- Promissory note
- Personal Guarantee
You purchase a house for $100,000 which has an after repair value of $200,000. Rehab on the property is going to cost around $30,000. Your investor gives you $130,000 at 12% interest on a 6 month note payable upon sale. You flip the property in four month or 120 days so it would be $130,000 x .12x 4/12 which equals $5,200 in interest. Your happy investor makes $5,200 in 4 months by really doing nothing and with very little risk. Simple enough.
How does the process work?
- Find a Private Investor
- Meet them and give a presentation
- Find a Property to Flip
- Get money from the investor and Close on the deal
- Fix up the Property, Find a Buyer
- Sell the House
- Pay Your Happy Investor
- Repeat the Process
Last where do you find Private Investors?
Do not network, you need to be recruiting. Go to the networking events in the community and education prospective investors on you Real Estate Business. Talk to them about what you do and tell them about your private money programs available. Ask for referrals and have others ask for money for you. Everyone has those dynamic people in their lives that are just go getters. Recruit them to find private money for you. Look for investors at the local REIA, ask real estate attorneys for referrals, busy professionals like attorneys, doctors, accountants, entrepreneurs and anyone you can think of that is rich.
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