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Good morning all,
When you are looking for private money? Is there an upfront fee you need have to pay to get the funding? I was talking with a private lender from Cali and he wanted a small upfront fee. Is this common practice?
Unless this private lender is someone known and recommended by your local Real Estate Investor Association, I would pass. Some so-called “private lenders” make their money by charging upfront, non-refundable fees and then informing the borrower that they don’t meet their qualifications and so the requested funding is denied. What is your “spidey sense” telling you?
There’s a big difference between a hard money lender and a private lender.
A hard money lender charges a lot of upfront fees and points and high interest rates and some even charge a pre-payment penalty when you pay them off.
A private lender does not charge upfront fees or other ridiculous charges. Some private lenders will accept part of the profits with no monthly payments. Some will want monthly payments. They are much more flexible than a hard money lender.
However, the best private lender is the SELLER! Negotiate to buy with seller financing for the best terms and conditions.
Learn how to do deals which do not require borrowing money from others who are not involved in the transaction (buyer and seller). These are the best and most profitable deals.
Jackie, The last post you made was great. I’ve recently been out trying to raise PM the last few week to do some Wrap Around Owner Finance deals.I must say it feels like I’m pitching Amway or some other Multi Level Marketing to these people( at the cost of nice lunch tabs ) . One guy said he would fund a deal only to leave me at the altar right before closing. This is a good way to lose your Self Esteem .
Im going to study up on Options and Master Leasing and keep my self esteem intact
Rich,
Before you give up, if you have some kind of track record, you can show this to potential private lenders. Ask them if they’d like to hear about something like that. Also, make sure they have done real estate deals in the recent past.
Qualify them just like they quality you. Find out their expectations. Their money is the same as someone else’s money.
Don’t let them dictate to you.Too many people out there have no clue about real estate. And being a private lender is NOT the place to start.
They don’t know what they don’t know!Oh, and don’t show them your best deals. They’ll expect those to be the norm.
If you don’t have a track record, see if you can borrow someone else’s.
Another RE entrepreneur in your area may be willing to help for a cut of the deal.Start a Meetup group and talk about real estate. Many friendships and business relationships begin this way.
Keep us posted,
Mike
I would say that finding private money is more of a process than a just-in-time event. Building trust and authority takes time, in my opinion. Having said that, if you have a good deal, it seems like you should easily find the money (easy for me to say, right?).
Did you get any insight on why your potential lender bailed?
The other thing I believe to be true is that you only need a handful of private money lenders. Make them feel secure and take care of them and you can do deal after deal.
William,
Couldn’t agree more with two points you made.
1. Raising capital is a process.
2. You only need a handful of private money lenders.I remember Pete Fortunato telling us he bought a SFH from one individual using seller financing.
Pete established a track record by paying on time. The seller became a partner/lender for Pete on 25+ deals.All roads lead to Rome,
Mike
Mike, Good points. I have a track record and have a few private lenders. I am trying to scale up a bit. I have a credibility kit etc.
I agree if they had some RE experience it might help. Too much though and they try to take over.
Ill try to feel them out first in the future.
Still intrigued with getting the seller to be the Lender as per Jackie.
Jackie, Can we get your thoughts on borrowing Private money?
RichRich
Be sure to study the “getting a private lender” training that we have in the Premium Member section.
I have only used a private lender 2 times in 25 years but I can tell you that it is a lot easier to find $ if you have a deal on the table that needs funding. It’s REAL to them then.
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