Using Private Money To Fund Your
Real Estate Deals
By Omar Johnson
The author has permitted the reprinting and redistribution of this
article.
One of the most valuable abilities you can have at your disposal as a
quick turn real estate investor is the ability to raise cash from
private sources to meet any funding need. If you become an expert at
raising private money you will have developed a skill that is highly
valuable to you as well as to those you work with.
The potential uses of funds from private money are limited only by the
bounds of your creativity, but there are some common scenarios where
they can be applied to great effect. For rehab investors (you or your
buyers) private funds can be used for purchase and repair costs and
paid back when the property is sold or refinanced.
If a juicy deal is about to go down the tubes due to a premature
foreclosure, you can use private funds to postpone the foreclosure and
save the deal, paying the money back when it closes. Another instance
where fast private funding can come in handy is any time you want to
execute a double closing and the title company requires that you have
the cash on hand for the purchase.
This money can be borrowed and paid back extremely quickly, perhaps
within a few days. There may also be a circumstance where an individual
who can't qualify for conventional financing has enough equity in a
property to convince a private lender to lend money for a purchase or
refinance.
Who are private lenders Basically they're ordinary people, with the
qualifying feature that they have some sort of substantial savings or
assets that are not earning them a significant return. This might exist
in the form of cash in a savings account or CD, in the form of low
yield bonds or stocks, or it might be held in the form of a self
directed IRA.
It is important to realize that your private lender does not
necessarily have to loan you the cash themselves, but can use their
assets to secure a loan on your behalf from a conventional lending
institution. For example, if your private lender owns some municipal
bonds earning 6% which she is willing to pledge to secure a loan on
your behalf, you could offer her a 6% return on the cash you borrow and
she would double her earnings, since her bonds would continue to earn
6% while you are using the cash.
Knowing who private lenders are is important, but so is knowing how to
acquire their contact information. If you handle your business
appropriately finding these individuals should happen on a regular
basis.
There are three techniques to build your list of private lenders.
The first is networking; as you talk to your colleagues and others in
the business, make a habit of asking what private lenders they use and
granting favors in exchange for referrals. The second is canvassing
your existing wholesale buyers by asking them if they lend money for
real estate transactions. The third is cultivating new private lenders
by asking Have you considered investing in real estate whenever you
encounter a qualified individual.
Negotiating with private lenders should not be difficult. Simply offer
them security with a low LTV and guaranteed repayment and an interest
rate that will be better than what they're already getting, and ask for
reasonable terms in exchange long term or short term amortization, a
balloon note at the date of your choice, no monthly payments; these are
all reasonable things to ask for if your deal is solid.
Omar Johnson is a successful real estate investor and author of the
home study course Renegade Stealth Marketing For The Savvy Real Estate
Entrepreneur For more info visit
httpwww.renegadestealthmarketing.com
If
you would like to take advantage of the market and learn how to invest
in real estate and you are local to the Dallas Fort Worth area, I know
a really great teacher and mentor here in Arlington Texas. Please take
a look at his web site: DennisJHenson.com,
Dennis has a great Mentoring and training program, I know because I am
one of his former students. I learned a lot from his one on one
teaching technique. - Michael Harman 817-457-7572
mchfun.business@gmail.com
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