By Jim Ingersoll
I am sure you know the reasons why to never use a bank for financing investment real estate.
But just in case, here are few reasons:
1. Cash and credit – Banks expect great credit and they expect a 20% down payment. How many houses can you buy with 20% down-payments? For most investors, the answer is “not many” OR “not enough”
2. Risk – Take time to read through the mounds of paperwork you sign at closing and see you are signing your financial life away should something go wrong. A personal guarantee is like giving a stranger a blank check with no date on it.
3. Speed – How long does it take to get a mortgage from a bank? The answer is always “too long.” If you have a motivated seller or great deal in general you can’t usually wait 30 – 60 days to go apply for and get a mortgage.
So, how can you find private money for your real estate investments? What a great question.
The process is completely centered around education. That education starts with yourself as the real estate investor and continues to your ability to educate potential private lenders. That’s right it all starts with investing in yourself to learn how to fund your real estate investments without a bank. The normal process is to go to the bank, meet the loan officer and they tell you all the details.
When you buy with private lenders you need to understand the whole process in detail including:
1. Terms, rates, amortization, equity participation, etc.
2. Documentation – Promissory Notes, title insurance, deeds of trusts, mortgages, etc.
Once you understand how to structure the private money, you can learn to present your deal, calculate the returns and provide the information that private lenders will want to see.
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Want more great news?
Make a list of 5 people you know that could become your own private lender. These could be small business people or corporate folks with retirement money. Engage these 5 people with the the “how” they can invest in real estate with you. Invite them to lunch or dinner and begin to tell them what you do and how they can participate in a joint venture with you.
