The reason why private money is often referred to as “hard money” is that it is difficult to find it. However, as long as you have the right deal you can find cash quite easily. Newbies think that in the investment game you first have to find financing resources. Wrong. The first thing you should do is find the next deal and put it under contract. The second part is finding a private money lender to back your real estate transactions. The good news is that you can turn to family, friends and professional resources to ensure you private lending for real estate.
Private money lenders – what are they?
Private money lender is just another fancy term used to refer to an individual or even a company that offers loans to people who wish to invest in real estate. Obviously, the term does not include banks. Financing can be provided by your family members or your colleagues. It is preferable to deal with a non-organization because the returns are higher in comparison to what a commercial bank can offer you. In addition to this, it is not necessary to jump through hoops, but rather to build a strong relationship with the granter. Developing a good relationship means that you can even borrow one hundred percent of the purchase price.
Where do I find a private money lender?
First of all, you should consider your friends and family. More often than not, real estate investors and entrepreneurs resort to family members and close friends in order to raise capital for an investment deal. The main advantages of using these resources is that these people know you better and they are less likely to refuse you. Unfortunately, you cannot count on friends and family 100% because they do not have the knowledge to understand your vision. Another option include would be investor groups. Taking into consideration that lenders are not looking forward to taking risks, make sure to create a professional presentation.
Getting the lender to trust you
The biggest challenge you actually have to face is convincing the capital partners to trust you enough to do business. You should make the parameters of the investment very clear to them. For instance, any investor is most interested in knowing if the property requires any repairs of it has been recently updated. If you are considering a house that still has a 70s décor, then it will definitely need some work done, reason why you should write a quick sentence and give the capital partners an estimate. The market value of the home is equally important. A small spreadsheet containing the recent sales in the area will come in handy. Without this basic info, no one will agree to further discussions.
The bottom line is that private money lending is a great way to fund your real estate deals. Besides the fact that you do not have to jump through hoops to get your projects financed, bestowers are very easy to find. Just turn to your friends and family, or find some capital partners. However, prepare your portfolio because no one likes taking risks.