5 Keys to Private Lending Success-Part 1
WIIFM
This acronym stands for “What’s in it for ME”. And if you want to interest anybody in your project, it is the first question in their mind that you have to answer. It’s not about your deal, or how much you know. It’s about them and what they want.
Remember Dale Carnegie’s famous book “How to Win Friends and Influence People”. It was published in the 1930’s and is as true today as it was then–because it talks about a fundamental truth of human nature! After all, what you are looking to do with a private lending prospect is to:
1. “win friends” - that is build their trust
2. “influence them” to invest in your project.
Well, it is part of human nature to ask “What’s in it for ME”. Even altruists, and saints ask that question same as a business person or a wealthy person. The only difference might be what they consider a good reward to be.
So, in order to communicate with anyone, you have to first get their attention, and keep their interest. And the best and simplest way to do that when you want their money, is to tell them what their going to potentially get if you listen to you.
You could start off a conversation by saying something like, “Joe, Do you have an IRA or other investment capital, that’s not earning 15% and secured by real estate?” Of course you will modify this depending what return your planning to give, and what security (if any) there is for the investment. Or you could try: “Pam, would you be interested in earning 15% on an investment secured by real estate?”
Now, if the person says no–end of conversation. However it’s been my experience that most people will at least want to hear you out. And, of course, it’s much easier talking about your deal to someone who is already interested, than someone who’s resisting or bored.
Now, a lot of students ask me “how much should I offer a private lender”. Well, the only true answer is that depends. The key is to know what kind of return the person is normally getting from their investments, and what would be a significant improvement over that.
For example, with friends and family who I would generally classify as unsophisticated investors, their investment experience consists of savings, CD’s, stocks and mutual funds. Savings and Cd’s don’t even keep up with inflation. The stock market has been rather pathetic over the last ten years producing a measly 2.5% annual return. So for these private money prospects, a 10-15% return should sound pretty good.
For more sophisticated investors and high net worth individuals, a higher rate of return is expected since they have many more investment options.
However, there is one more key consideration: How much can your deal or project afford to pay an investor. If you are offering regular interest payments is the cashflow sufficient so that you can pay your investors, even in the worse case scenario. The answer had better be yes. More on that next time.
By the way, if you want to learn everything you need to know for private lending success, I’ve created the absolute best and most comprehensive funding manual you will ever see called “Show Me the Money“. It contains step by step instructions on how to get money from private lenders, high net worth individuals, lines of credit, financial institutions, buyers, sellers, notes, and much, much more. And, it’s a ridiculously low investment (for now!). Click here and Get in NOW.
Richard Odessey has been investing in Real Estate since 1999 and have bought, managed and sold over $5MM in assets over that time period. He has created a national network of RE investors that are a source of continual on-the-ground intelligence. Richard has also developed unique and proprietary tools to zero in on only high profit-low risk transactions.
