Introduction
Private money lenders are the most sought-after sources of financing for real estate deals. However, it can be a challenge to find these elusive lenders. In this article I’ll share some tips on how to attract private lenders and get the funding you need for your next deal.
Explore private money lenders
Private money lenders are individuals or companies that lend money to real estate investors. They’re often more flexible with their terms than traditional lenders. You can find private money lenders through referrals from other investors, real estate brokers and lawyers.
Private money lenders may require personal guarantees and/or collateral for the debt you take on in order to secure a loan from them.
Reach out to high net worth investors
A high net worth investor is someone who has a large amount of capital to invest in real estate. The amount they can invest varies widely, but it’s generally at least a six figure sum, and often much more than that.
To approach these people, you need to know what kind of investment opportunities they like and be able to show them how you can help them make money.
One way to do this is by finding properties that have a strong value-add proposition, with more than one exit strategy. This will give lenders confidence their capital will be returned in the timeframes and terms being proposed.
Use real estate crowdfunding sites
Real estate crowdfunding sites are a great way to find private funding for your deal. They’re also an excellent way to learn more about the process of getting funded and should give you a good idea of what you need to do before you submit your deal.
There are hundreds of real estate crowdfunding sites out there, but not all of them will work for your particular situation or offer the best terms and rates. You’ll want to look at several different sites before deciding which one(s) will be right for you and your deal.
Search for joint venture partners
Joint venture partners are people who can help you with a particular aspect of your business. For example, if you’re looking for private funding, they might be able to provide that financing for a share of the profits.
They can be helpful in many different ways: finding properties or providing financing are just two examples. The key point here is that they should have expertise in an area where you lack it–bringing a new level of experience, expertise & value to a project.
Should You Sign a Personal Guarantee on a Real Estate Loan?
A personal guarantee is essentially an agreement that you’re personally responsible for the debt. If you default on the loan, the lender can come after your assets and income to pay back what they are owed.
It’s a personal choice of course, but instills confidence in your investment partner by doing so.
Review your existing network.
- Review your existing network.
- Use your network to find private lenders.
- Ask friends, family and colleagues for help. You may be surprised at the results!
Ask your trusted professionals for referrals.
When you’re looking for private funding, it’s important to ask your trusted professionals for referrals. Your colleagues may surprise you.
Also talk with your accountant or broker who may be connected with other real estate lenders. If they don’t know of anyone that can help you out with your funding needs then they’ll likely be able to recommend someone else who does know someone in the field.
Your friends and family may also have some great suggestions when it comes time for finding private funds!
Approach family and friends.
Family and friends: If you’re lucky enough to have family or friends who are willing to loan you money, this is one of the best options for getting a private loan.
The reason?
For one thing, they know you well enough that they can make an educated decision about whether or not they want to lend their hard-earned funds in support of your business venture.
And if they do decide to lend to you, make sure to get an agreement and terms drawn-up–it is important to act professionally and in a commercially minded way, even with family.
Speak at real estate events.
If you’re looking for private funding, a great place to start is by speaking at real estate events. You can learn about trends in the industry, meet new people and get exposure for your business.
It’s a win-win situation: You’ll be able to network with other investors and entrepreneurs who are interested in real estate investing; they might even be willing to invest in your deal if they like what they hear!
And if they aren’t able or willing? Well, it’s a process, and you’re showing-up and gaining valuable learning from the experience to keep improving your pitch and your future opportunities.
Take advantage of these tips to attract private lenders, and you’ll be able to build your business more quickly and with more flexibility than if you were looking exclusively to institutional lenders.
Conclusion
If you’re looking for private funding for your real estate deals, there are plenty of options out there. You just need to know where to look and how best to approach potential investors. We hope this article has provided some insight into how you can start searching for these sources of capital so that you can get started on your next project today!
