Finding private money lenders should be a smooth process. Some people find them easier, using resources that they have gathered during their research. Other people, however, are not as successful in their search – and end up appealing to loan sharks that will only empty their bank accounts.
Good private money lenders are fairly difficult to find. However, you don’t only have to find them – you also have to establish a relationship; otherwise, they won’t want to work with you.
Thus, private money lenders care very much about the relationship with their clients. Basically, they are giving you money in order to be successful. It may take some meetings until they commit, which is why you should do everything in your power to convince them. In other words, the lenders will want to see the way you work and if you’re reliable.
So, would you like some advice on how to find your own private money lenders and start a successful relationship? If that’s the case, then keep reading this article.
How to Find Private Money Lenders
To have some insight on the matter, here is a story – imaginary or not – that you may want to remember. This way, it should be easier for you to find a lender that you can actually trust.
When you start looking for lenders, the first thing you should do is spread the word on social media. Almost everyone owns a social media account nowadays, so why not use it to your advantage? In other words, you should talk about your investment activities on your accounts, so you could gain some credibility.
Thus, once you have posted a handful of project updates, you should ask if anyone is looking for a decent return on an investment secured by real estate. You may also want to call some people you know and have already worked with. The list should include your title company reps, agents, closing attorneys, your CPA, and many others. You don’t want to miss any opportunity. You’ll be surprised to find out how many small lenders will be willing to help you.
In your attempt to expand your private money lender list, you may notice that you are attracting more and more private lenders like a magnet. However, this is a good thing; if you end up losing lenders, the new ones should look like a blessing to you. You should not limit yourself to the current lenders – because no lender ever offers the same deal. Also, you shouldn’t rely on the people you know to guide you towards the right lenders. In situations like these, you need to be willing to step outside your comfort zone and research some other places (and people) as well.
The Soft Pass vs the Hard Sell
The soft pass refers to the fact that you pass a comment in order to spur the interest in someone who may be looking for a place to invest some money. For instance, you tell your friend Michael that you have been working on analyzing some new properties. Also, you tell him that you are looking for funding options at 10% or equity share. So, Michael decides to help you.
You feel a certain relief when working with people you already know because the relationship is established, and you know what to expect from them. Therefore, if a friend or a family member has a soft spot for you and believes in you, it may be your lucky day. They will invest in you and your projects.
However, don’t consider this if you’re not fond of your family or the acquaintances that could help you. It would only give you headaches after a while, and I’m talking from experience.
If you are not into “naturally inserting it into the conversation” thing, you should just approach it directly. Basically, you sit down with Michael and tell him everything about your plan. You can even make a PowerPointpresentation if that makes it easier for you to explain. Do everything in your power to convince this person that you are serious and have a well-thought plan.
In fact, this is a great way to be taken seriously by any contact who is more formal and wishes to be sold on you and your firm. They need to know why they should invest in you, what are the deals you’ve previously done and what you have given to the lender in return. Moreover, they must know more about your current businesses and project in case they want to invest in your firm right away.
However, you will find that it is much easier to tell people the truth about your plans, rather than just implying it and waiting for them to make a move. Most lenders are more likely to work with you if you come with a well-designed plan. This way, they will know that you are serious about it and that you are a reliable person to work with.
So, don’t hesitate to be honest about your upcoming projects – it may be to your advantage.
How to Find Private Money Lenders Near You
Looking for local meetups is a great way to find private money lenders close to you. It’s an opportunity to let people know that you exist, and you may find lenders to connect with for your future projects. Therefore, try to attend as many of these events as you can.
If there is nobody you can connect with and can’t network for some reason, finding local lenders should be the next thing on your list. A way to do this would be looking up the county records so you find out about the interest rate, closing price, and the lender’s personal information.
When you look for lenders, you may want to skip checking every property in order to see the name of the lender. It is likely that it will just be a waste of time. Instead, you may want to use one of the data broker websites – and see exactly who is near you at that specific time. Going through each site could take ages, but there are some resources that could be helpful.
What Should You Do Now?
Have you found some reliable lenders? If that’s the case, it’s time to call them. This method proved to be quite successful for me. So, you should make a list of the private money lenders you have found and their phone numbers and give them a call.
When you call them, you may want to have a script ready. You should tell them your name and how you came across them (for example, you saw them lending money for a certain project). If your company does similar projects, you might want to let them know about that as well – since it will help you to work up your relationship. If they’re willing to lend more money for similar deals, then you might have found yourself a lender. If not, stick to the script and try again.
If all goes well, the conversation would go into your track record and you can try to make the lender comfortable with your business and what you do. This is where the relationship could be established. So, it is important to give them a rapport about the projects you are working on, the investors you work with, and many others. This adds credibility and makes you look serious. Therefore, do everything that’s in your power to convince the lender that you’re a good choice. You must promote yourself the best you can.
You could also send the lender a direct e-mail. You should be able to find their e-mail address on the list the broker gives you. So, send them a message and try to get an answer, and maybe you will even get them to call you. However, if you want the magic to happen, try to have a solid presentation.
The message you send doesn’t have to be overly complicated – you can follow a script similar to the one above. In other words, you mention the property they lent money to, and ask if they would be interested in doing the same with a similar project. Include everything that would be relevant to their decision-making process, such as a property list, your previous projects, your current ones, etc.
Additionally, include your contact information, so the lender can get in touch with you in case he’s interested in lending you money. Include information about some deals you are analyzing and would like to be run by them and ask them to contact you if they would like to discuss the information further.
Trying to get private lenders is no easy task. You have to make a detailed plan to present to potential lenders and you must know how to establish a fruitful relationship with them. Moreover, you can try to ask people you know to help you with funding, or just look for private money lenders near you and contact them.
Hopefully, the information provided to you in this article will be of good use. As long as you are thorough, confident, and transparent with your prospective lender, then there should not be any issues.