How to Get Private Lenders & Lines of Credit to Fund Your Business

What we are going through – right now – is an economic revolution where there is going to be the greatest redistribution of wealth that we’ve seen in the last 100 years.  The greed of banks have really made a mess of things.

While credit from banks have dried up, there’s a whole population of private money investors that are looking for opportunities to invest their money.  And even now—especially now, real estate can generate extraordinary returns for the real estate investor and their private lenders.

Why?  Because buyers with cash from private lenders can literally name their price.  This means getting deep discounts of only 20% to 40% of market value.  And a prices like those, investors can still sell at a discount to homeowners and still make hefty profits.

Wouldn’t it be tremendous, if you could get in on the secrets of borrowing private money?  I’m talking about friends, family, private money funds, and angel investors.

What’s In It For Me?

The first key ting you have to address is WIIFM (which is not a radio station) it is an acronym that stands for  “What’s In It For Me”.  That’s right- private individuals just like the banks are motivated by the greed factor.
So “What’s In It For Me” is really the question on which rests your private money borrowing success.

Since this is the first thing on a potential investor’s mind, wouldn’t it make sense to start the conversation by telling them?
How much you offer really rides on the kind of private lenders you are presenting to, and what expectations they bring to the table.  For friends and family – their expectations are based on CDs or the stock market.  So for friends and family consider offering a 10% or higher returns.
On the other hand, for private lenders of high net worth (like angel investors), they regularly look for investments with much higher returns.  To be at all interested, they would expect returns of 15% or higher.
Wouldn’t it be great, if you could borrow the money with no interest, no payments? 

Then consider offering instead of interest, an equity—a percent of the profits.  And if the private lender does want regular payments, you can use mixed funding.

Make the interest payment low enough to still get some cash flow from the property, and supplement the return to the investor by adding what’s called an “equity kicker “ i.e.,  offering a percent of the profit to the investor to increase his yield.

Real Estate investors who would like to learn more about working with private lenders and creating a financing plan can take advantage of a new resource I’ve created called the INVESTOR WEALTH NETWORK .  In it I give my personal tips tricks and techniques for funding your real estate deals, with particular emphasis on finding, preparing for, and presenting to private money lenders and other high net worth invdividuals and funds.

Posted to Angel Investors, Friends & Family, High Net Worth Lenders, Private Lending
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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, financial institutions, buyers, sellers, notes, and much, much more. And, it’s a ridiculously low investment (for now!). Click here and Get in NOW.

Posted to Friends & Family, Private Lending, Uncategorized
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I saw an article in a recent issue of Forbes about guy who is buying foreclosed properties at the steps.  The article relates how he bought 2 properties worth $725K for $400K each using $120K in savings and $680K from a line of credit.  He sold the homes 6 weeks later for $689K each, and netted $485K from the total transaction. 

Not bad for 6 weeks work.  Now this guy had a credit score of 819, which allowed him to get preferential treatment from the bank offering the 680K mortgage.  The article didn’t say what his income was.  However, you can see what a really good credit score can do for you.   Now, most folks don’t have credit scores in that range.

Now, as big money goes, the $800K that this guy used, sounds like a lot, but it really isn’t.  Let’s suppose you really wanted to flip houses in bulk.  After all, most real estate investors know how to do this.  They just don’t have the money.

Well, suppose you found some private lenders, that you agreed to pay 15% for the use of their funds and that money would be paid back in 3-6 months.  That’s a pretty awesome return on their investment.  Furthermore, why buy properties on the steps?  It’s hot, sweaty, takes a lot of time, and your carrying around big cashiers checks you may or may not use.

Better, call the banks directly and ask for the REO department.  Now, if you want to buy a single house, they may not be interested.  However, if you want to buy say 10 per month, that will not only get their attention, you can probably get an even better discount.  In fact, a colleague of mine is doing exactly that, and picking up homes at 40 cents on the dollar.

Now suppose after all is said and done, he makes $100,000 per house and is selling them well below market.  That would net him $1 Million per month!  Great plan–yes?  If your buying 10 homes at $200K each, that’s $2Million per month of funding.  So all we need is the money.

Unless you’re fantastically wealthy this is not a game you’re going to be playing with your own resources.  You’ll want to be talking to high net worth individuals like angel investors, private fund managers, and financial planners with high net worth clients.  For some this would still be too small an investment.  And there are others that would be excited to participate in the opportunity.

Want to get stared.  There’s some groundwork and preparation you’ll need to establish yourself as a credible investment option to these sophisticated investors.  Doing so, is a pretty straightforward process.   

To get started I highly recommend you get your hands on my “Show Me the Money” training manual.  There are several chapters devoted to raising private money, including millions from high net worth individuals.  Just use this link or click on the icon on the right side of this page.

Do this right and the current foreclosure crisis will make you one the high net worth individuals your desiring to borrow from right now.

Posted to Angel Investors, Business Lines of Credit, High Net Worth Lenders, Multiple Funding Strategy, Private Lending
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Every real estate investor with half a brain, knew that when the banks started giving out ARM’s (adjustable rate mortgages) like candy, somebody was going to have to pay the piper someday.  Well that day has come!

But instead lambasting the banks who are now causing some much suffering throughout the economy, the Feds and Congress are devising “bail out” plans. Never mind the strapped homeowners who banks refuse to do workouts for… Nevermind the investors who can’t get lines of credit or investor home loans because of “tightened” credit requirements.

Just read the following sweet deal that the 2 largest mortgage lenders are getting, even though they’re losing massive amounts of money, and the equity from their stock price is in the toilet:

“The Fed said it granted the Federal Reserve Bank of New York authority to lend to the two companies “should such lending prove necessary.” They would pay 2.25 percent for any borrowed funds — the same rate given to commercial banks and big Wall Street firms.
The Fed said this should help the companies’ ability to “promote the availability of home mortgage credit during a period of stress in financial markets.”

Secretary Henry Paulson said the Treasury is seeking expedited authority from Congress to expand its current line of credit to the two companies and buy shares of the companies — if needed.”

Do you think maybe these institutions could extend investors (who really are the creative engines in the real estate market) increased lines of credit at lower interest rates?

Especially since real estate is really a good deal now for those who know how to choose wisely.  If you’d like to start choosing more wisely, and be able to convince private lenders of that fact, you should check out my Expert System called the Deal Evaluation Tool.  In not only precisely calculates your profit and income for 10 years down the road, it also quantifies the risk so you know what to avoid, BEFORE you sign the contract!

Posted to Business Lines of Credit, Commercial Lending, Institutional Lending, Money & the World, Private Lending
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I my experience, most investors feel about business plans the way many people feel about exercise.  They know it’s really good for them, but they just can’t find the time to get around to it.  Other things always seem to come up. 

Now, you probably know the saying (and the truth) that “if you fail to plan, you plan to fail.”  I know I’m preaching to the chior, but let me give you some other reasons why a business plan can boost your success in obtaining large sums of money from private lenders:

1. Having a well-thought out business plan, is a powerful and positive marketing document for sophisticated and wealthy private lenders and angel investors. 

2. Your business plan will enormously boost your credibility with private lenders (even friends and family)

Let me explain. 

Most most investors get into real estate, strongly motivated to be working for themselves and achieving financial freedom.  And my guess is that even if you have a company (and you should), it’s really a one-man (or one woman) show.  Sure, you may use an attorney to close, but it’s pretty much you. 

That may be great for you, but scares the heck out of private investors.  Why? because they are used to evaluating Companies, as investment prospects.  A company is an entity that is not dependent on one individual.  If the individual gets sick or goes on vacation, the company’s business continues, and doesn’t put the investment at risk.  Having a business plan that shows you have or are building a strong organization that knows where it’s going is a major factor in addressing that concern.

In fact, all of the sophisticated and wealthy private investors that I know, expect to see a business plan to evaluate an investment. 

As a marketing tool, a business plan will help you create your story that will attract the interest of private lenders.  In fact, having a “good story” is absolutely essential if you want to be successful in raising private money.

I know that sitting down to write a business plan is a daunting prospect.  Would having a template to follow, and even being able to get a plan written for you be of interest?  If so, you are invited to join our inner circle where we have a whole training session on just this topic.

Posted to Angel Investors, High Net Worth Lenders, Million Dollar Slush Fund, Private Lending, SEC, Uncategorized
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You know what really stops real estate investors from making a fortune. It’s not finding most of the funding for a deal–it’s finding that last bit. For example, almost anybody can get an 80% LTV mortgage. But the next 20%–there’s the rub.

Oh and you “subject to” investors where the seller is giving you their house or apartment? Isn’t it true that more often then not, there’s additional cash required for mortgage arrearage the seller left you with, or minor (sometimes major) repairs, other liens, marketing expenses, etc? You can easily go broke doing subject to deals without an additional source of money.

There are actually quite a few other sources of money, and they work quite well with primary funding strategies like institutional loans. I call it, the multiple funding strategy. These days with credit tighting, institutions lowering the loan to value ratios they’ll fund, and looking for more security from the investor, a multiple funding strategy is practically a necessity.

This is an especially good strategy to use with private lenders who expect a high return on their investment (20%+). Just do the math. If you use an investor’s money to buy a house worth $200,000. And let’s say you end up paying $160,000 for acquisition, repairs, etc. You put a tenant in the house for 3 years on a lease option which the tenant exercises for $230,000.

Okay, your profit is approx $70,000. However, if your investor put up the entire $160,000, what’s his return if you gave him the entire profit? It’s about 44%–that’s over 3 years. The investor’s annual return is only 14.5%. If the investor expected 20%, he’d be pretty disappointed.

And what do you get in this scenario? Just the cashflow from the property. Now with no mortgage, let’s say that’s about $1000/mo. You net $36,000. However, if you owed the investor the 20%/y interest, $26K would come out of your share to the investor, netting you only $10,000.

Now compare the same scenario with getting an 80% institutional loan at 7% for the $160,000 purchase price. Now, you’d only have to borrow $32,000 from the investor. 3 years at 20% would amount to $19,200. The investor is happy, and you’d net $50,800, plus the net cashflow from the property!

Which scenario would you prefer?

By the way, if you want to know how to fund every deal you do, 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, financial institutions, buyers, sellers, notes, and much, much more. And, it’s a ridiculously low investment (for now!). Click here and Get in NOW.

Posted to Business Lines of Credit, Institutional Lending, Multiple Funding Strategy, Nothing Down, Private Lending
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I’ve gotten a number of comments about my “Show Me the Money” Manual. And I wanted to take the opportunity here to respond to them.

First of all, this manual is not just for experienced investors. In fact, most of the techniques I teach in the manual work great even if you are a rank beginner. For example, buyer and seller financing, private lending with family and friends, equity exchange… In fact the only areas where a beginner will have a significant learning curve is with commercial loans, and million dollar funding.

Secondly, don’t let the low price decieve you. This is not just a teaser, that requires you to buy something else, in order to do anything worthwhile. Anybody, can follow the procedures I describe and be successful in having funds for real estate purchases.

So, if you want to own this one-of-a-kind deal funding manual, click on the “Show Me the Money” icon on this page or Use This Link Now.

Posted to Business Lines of Credit, Buyer Financing, Friends & Family, Private Lending
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Today is the 4th of July. I love this country because it offers more opportunity for anyone to fulfill their dreams than any place on earth. And that goes for getting the money from private lenders or other funding sources (of which there are many). Yet many investors find funding the major challenge to success in their real estate investing business.

Let me give you a tip–I call it the ‘Trust Factor’. A saying I’ve learned from my Angel Investor acquaintances is “Bet on the Jockey, not the horse.” This means that when a potential private lender is considering a new investment, the people involved in the venture are a major focus. That means you and your team.

My 2 yr old granddaughter has taught me a profound insight about trust. She believes everything her Mama, Nana and Pa (that’s me) tells her. Why? Because she totally trusts us and we always tell her the truth and do what we say we’re going to do.

And aren’t those the characteristics of people that we trust in our life. So, if you tell a potential client or lender that you’ll call them tomorrow, make sure that you do, rather than calling later with an excuse. If you tell a loan officer that you’ll have the paperwork for them on Wednesday, make sure you do, and that the package is complete! Same goes for making payments on-time (or early), and so forth.

The interesting thing is that when you do this consistently, you train other people to treat you the same way–just like my granddaughter. And it’s such an easy thing to do–anybody is capable of it. Make it one of your principles.

By the way, if you want to learn the other 4 characteristics 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, financial institutions, buyers, sellers, notes, and much, much more. And, it’s a ridiculously low investment (for now!). Click here and Get in NOW.

Posted to Institutional Lending, Million Dollar Slush Fund, Private Lending
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So with all the negative media about real estate, how do you convince a potential private lender, that his or her money is safe being invested with you?

First, the “good news” is that people don’t have any good alternatives for investing their money right now.  The stock market is very volatile, and has been performing poorly for quite a while.  Start up companies are as risky as they’ve ever been.

In fact, it is really a good time to buy real estate because prices are depressed and sellers are motivated.  However, how do you convince your potential investors that their money is safe with you and things won’t get worse.

Here’s something to consider: What if you could show your investor that you had an objective means of evaluating properties such that you could show them, that even if things got worse, they’d still make a profit?

That would certainly set you apart from the crowd, and make your appeal more convincing.  Fortunately, there is such a tool, that I’ve created and that we use in all of our real estate deals.  It’s called the Deal Evaluation Tool.  It’s basically an expert system that analysis the financial returns and quantifies the financial risk of any kind of real estate transaction, with any kind of terms.

I personally think that no investor “should leave home without it”.  With proper due diligence, and this expert system, you being doing killer deals in any kind of market, every time.  Check it out yourself by using this link.

Posted to Angel Investors, Friends & Family, High Net Worth Lenders, Marketing in Real Estate, Private Lending
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Real estate is a great investment, right? And a lot of investors I know are making a killing.  So, why all the negative press?  The answer is very important to you, because your potential private lenders are reading and watching this very same media, and thinking it’s a smart move Not to invest in real estate.

Well, first of all, the press is partially right–real estate values are falling in many (but not all) parts of the country.  And people with ARM mortgages are getting foreclosed on right and left!  In 2007, Atlanta had over 70,000 foreclosures!  And, of course, this whole crisis was brought on by greed.  Greed of the banks and mortgage brokers that qualified people for mortgages they couldn’t possibly afford once the rates re-adjusted. 

And now, in a move that gives hipocracy a whole new meaning, the banks are tut-tutting over the “shock” and tightening credit so it’s even harder for legitimate borrowers to buy property.  This is really bad news for many sellers, because with fewer buyers and more foreclosures, prices are being driven south.

And this is what the public and your potential private lenders hear about.  However, the other side of the story.  It’s a great buyer’s market where you can pick up property at huge discounts.  And this has to be the core of the story you tell your private lenders. 

Now, you also need to provide a story about how you’re going to protect their money from all the negative news and other things that might happen.  So, when you tell them you can get property at a deep discount, let’s be clear about what price is a “discount”.  First, a discount does not mean, a price lower than it used to be a year ago.  A discount means a price very much lower than the current market value.  In other words, a price below what the house would sell instantly by any qualified buyer where you would still make a hefty profit after paying off your loans and your investors.  This is what I call, “making your money when you buy!”

In other words, your acquiring property for an amount that even if things didn’t go as planned you’d still come out ahead.  If you don’t know how to figure that, you really should own my Deal Evaluation Tool.  It’s an expert system that will perform the “what if” calculations for you and give you a thumbs up or a thumbs down on any real estate purchase.  I wouldn’t consider any property without it!

Posted to Angel Investors, Friends & Family, High Net Worth Lenders, Private Lending
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