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One of the most common problems with new and even novice investors
is that they don’t have any money to invest, or they have
shaky credit. The bank wants more documentation and the deal needs
to be done fast! The great thing about being a creative investor is that
you can do things that the average person wouldn’t think of
doing.
There are a host of topics that explain how to buy and make
money with real estate ‘unconventionally’. However, I want to
remind my fellow investors that Cash is still King! And if you use
your creative methods, in addition to private money, the results
can be staggering!
Many investors that I know have no idea on how to fund a deal
quickly. Most can go out and find a profitable deal, and then they
realize that they have no way to fund it! There are a lot of
people yelling for financing help on real estate newsgroup boards! The Power of
Private Money can be the answer to your financing problems and help
take you to the next level!
“Are You Talking About Hard Money Lenders?
I’ve heard all this before!”
NO, I am not! Although Hard Money Lenders (HML) may be a good
alternative, and they work for a lot of investors, they are not
right for everyone. Hard Money Lenders still have tough
requirements that can’t always be met. You won't find houses to
buy all the time at 65% Loan to Value. This is a requirement for
many HML’s. Don’t count these guys out though. You may need to
lean on them someday if all else falls through!
“If you are not talking about Hard Money Lenders, where else
would I get quick cash from”?
Great Question! Don’t let the simplicity of this answer draw you
away! Your money people are Private Individuals! You wouldn’t
believe how much liquid cash that private individuals have. Some
regularly keep their money in CD’s, Mutual Funds, IRA’s, etc.
They do this because they want a good safe return on their
money! Do you think you can offer them a higher return than they
are getting in the items listed above? I know I can, and I do!
“How Do I locate Someone with Private Money!”
The bad news is that they probably won't come seeking you out, so
you will have to go and seek them out. This is a numbers game,
just like real estate is. So in order to make this successful, you
will have to put some effort into it. If you are not interested in
putting effort into finding money partners, it may be better for
you to stay at your J.O.B. !
These people are relatively easy to find. You will find them
simply by talking with people, telling them what you do, and what
you are looking for. Word gets around quick! These people are
everywhere; your next door neighbor, your church friends, your
country club buddies, etc.
One of the easiest ways to get in front of these people is to meet
with local professionals that you know.
1) Your Attorney
You would fall off your chair if you knew how much money your
attorney handled. I sat down with my attorney and asked him if he
represented anyone that had extra dollars at their disposal. Do
you know what he did?........ He laughed at me! He can put in me
in touch with more people that have money than I could ever
possibly use!
2) Your Accountant or CPA - Same advice!
3) If you are not in a loop yet with a good RE attorney or CPA,
run a classified ad in the newspaper. Run it for 1-3 months in RE
section. Something like . . .
"Money Partner Wanted
12% return secured by
real estate. 555-5555"
or
"15% guaranteed return
on your money, secured by
real estate. 555-5555"
“Why Would These People Give Me An Unsecured Loan?”
They wouldn’t! You would offer them x amount return on their
money Secured by Real Estate. Via a 1st or 2nd mortgage, depending
on the situation! Someone once said that “Money Follows
Opportunity”. Private individuals will still want to know the
details of a transaction. That’s no problem! Show them that you
have done your homework, by providing them with the details, and
also show them the projected profit, for added security of their
investment and for their peace of mind. If you show them the
profit, someday, they may ask for a larger piece of the action.
When that comes, throw them a bone or two, or simply start using
another Private Money Individual!
“How Much Do I Offer Them?”
Some individuals will lend you the money at 8-10% per annum, and
others may want a flat amount of 40% of the profit. The more of
these guys that you put in your back pocket, the more choosy you
can be on percentages. You could generally expect to pay between
10-14% per annum. The difference with using a private individual
vs. a Private Money Lender (company) is that after a few deals,
and you have built up a trust level, you will be able to use this
money for many things. You could borrow only a small amount from
them to bring a mortgage current and buy Subject-To, you could
Short Sale a large 2nd mortgage, and borrow the cash to pay it,
etc. This is where being a Creative Investor will take you to the
next level!
“What If I Can’t Find People With Liquid Cash?”
My first response would be that you are not looking hard enough!
If indeed you fall into a pickle, there is still hope. Some
individuals may not have large amounts of cash on hand, but rather
a tremendous amount of assets! These are the people who can have
access to LARGE Lines of Credit! These people are just as great to
work with!
#1 They feel more secure that they are not putting up their
personal money (even though they are responsible for it)
#2 They can make money with none of their money invested!
You may have to pay a little more for this situation, because you
will be paying the interest on the loan, plus give them a flat fee
of the profit in the transaction. Anywhere from 10% - 40% of the
profit! If it is a worse case scenario and you have to use someone
like this to fund the deal, just remember that you wouldn’t be
able to do the transaction without them. Besides your 60%+ of the
profit may be all that you need to take you to the next level of
investing!
If you want to go to the next level in Real Estate Investing, you
may want to take the next 4 weeks and do nothing but seek out
private individuals with cash or access to large lines of credit!
Put several of these private money people on your call list and
stay in contact regularly! And when your next transaction comes to
fruition, you will see that there is Power in Private Money!
http://www.real-estate-urbana-champaign-illinois.com
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