Obtaining Unlimited Financing For All Your Deals
An easy way for you to obtain all of the funding you need for all of your deals is to build a portfolio of private lenders. This will quickly become an unlimited source of financing for your projects not because you are necessarily working with the super wealthy, but because you can recruit an unlimited number of private lenders – individuals who want to make real estate loans to you and your business.
Finding these individuals is simple. You don’t need to market to the super wealthy. In fact, these would be the wrong prospects because they already have money managers that are able to earn them high returns on their investments. Instead, market to everyday individuals who have money in low yield vehicles such as Money Market Funds, CDs, savings accounts, and even IRAs.
Typically they are earning under 3% interest on their money and you will be offering them the opportunity to earn 6%-8% secured by real estate at a very reasonable 70-75% LTV (Loan-To-Value) ratio. The chance to double – even triple – the return on their money will motivate many prospects to jump at your offer.
With full disclosure to your private lenders, you’ll be able to not only finance your real estate purchases, but all of the other costs as well. In other words, you can fully fund the entire project and have no out of pocket expenses. Private lender funds are also great to fill in the missing holes on projects.
Let’s for a moment assume that you used some other financing techniques from the earlier training and you purchased the house subject to the existing mortgage but still need to come up with $5,000 to bring the loan current and to give the seller some walking money. In addition, the rehab estimate is about $15,000 and you figure that you’ll have another $5,000 in miscellaneous costs associated with the project. That’s a total of $25,000.
Coupling the subject to technique with a small private lender results in a fully funded project. No cash needed on your part. Can you see how valuable private lenders are to your investment business?
But we’re not done. You can also use them to purchase REO properties and short sales – even when you’re wholesaling. Let’s say that the bank selling the REO will not allow you to wholesale the property. In other words, you must close on it first. You can still set up your buyer to close on the same day; and use private lender funds to purchase the property, then repay the funds the same day after the resale. Most private lenders would be thrilled to make $500-$1,000 on their money for 1 day, and that’s a whole lot less expensive than use a transactional funder.
The greatest advantage of a private lender is just that: they’re private. They are not in the business of making real estate loans. They have built a relationship with you and only want to make loans to you. You don’t have to go through a qualification process for each deal; the loan will not appear on your personal credit report; and the funds are generally available within a day so you can react quickly to opportunities you find in the marketplace.
If you are currently not using private lenders, you really need to add that strategy to your arsenal of tools for your real estate business.