Introduction
Whether you’re a real estate investor looking to buy your first property or someone who’s been in the business for years, it’s important to know how to fund your deals. Some people will choose to use their own funds, but others prefer raising money from other investors. While there are many different ways to fund your deals, using OPM is one of the most popular.
A private lender is an individual or company who is able to provide short-medium term loans.
A private lender is an individual or company who is able to provide short-medium term loans. A private lender may choose to lend money for a real estate deal and collect interest on the loan, or they may be interested in investing in your company as it grows.
Find a property
We won’t labour this point, as we have plenty of other articles covering this. However, the deal must always stack up and ideally have multiple exits showing how funds will be returned.
Find the money
The first step to finding private money is to find the right people. You want to find lenders that fit your goals, and will be good partners. You also need to determine how much money you need to raise, and what kind of terms you are looking for. Once you have this information, you can begin contacting potential lenders.
If there is one thing that I would recommend: make sure that every single person involved in your deal is committed 100% before moving forward.
When you are looking for private money, find lenders that want to work with you. Determine how much money you need to raise, the terms and rates that are best for your situation.
Finding Private Money Lenders
- Find a lender who has (or wants) experience in real estate.
- Find a lender who understands the type of deal you are doing.
- Find a lender who is willing to work with you on terms you find acceptable.
How to Find the Right People
In order to find the right people, you have to first know what you’re looking for.
- You want investors who are interested in real estate. A great way to find these people is through networking with other investors, who can recommend others they’ve worked with in the past. You can also look at local real estate clubs or forums and get connected with local investors that way.
- When looking for investors, you want someone who’s comfortable taking risks and understands the type of deal you are working on. That being said, don’t limit your search based solely on this criterion.
- Your ideal investor should be someone who will work well with you as a partner—a relationship built on trust and mutual respect—rather than simply providing funding for your deals without contributing anything else beyond cash itself.
How to Structure a Deal with Private Money
- What is the deal structure?
- How will the money be returned?
- What risks are there, and how will you mitigate them?
What is the deadline for completion and return of funds? What is your contingency plan in case something goes wrong?
Finding the right private money lenders and structuring the right deals can help you fund more real estate investments than you might otherwise be able to do.
Private money is a great source of funding for real estate investors. It can be used to fund your deals, and when you genuinely start looking, you’ll find it readily available. It’s a great alternative to traditional financing, and it can help you fund more deals than you could with your own money, helping you scale.
Private money may charge anywhere from 3% to 15%
Private money may charge anywhere from 3% to 15%. Make sure your deal stacks, including the cost of finance. Know how the loan capital will be repaid and have multiple exits.
Other people’s money is easier to secure than ever before.
Private money is a great source of funding for real estate investors because for the right deal, it’s readily available and fast to secure.
When you use private money, you might be borrowing from accredited investors with significant net worth looking to diversify their portfolios with debt investments.
You can also borrow from family members or friends who have an affinity for real estate and want to invest alongside you in deals.
Conclusion
There are plenty of deals out there, but without the money to fund them, you’re limiting your business’ growth options. Leveraging other people’s money (OPM) is key to scaling your real estate business.
