When beginning your career in real estate investment it is vital to have your financing squared away before looking at specific properties. One avenue of funding is private money lending. Utilizing private money lenders increases your available capital ad decreases the risk to your personal finances. In this blog, we will discuss what private money lenders are, how to find them, and how to utilize them to invest in real estate.
What exactly is a private money lender? Private lenders can be individuals or private companies willing to loan money to you as a private individual in order to fund your real estate investment. These are not banks. The advantage of securing private financing rather than traditional bank lending is the relationship between you and the lender. These transactions are based on your relationship with the lender rather than hard credit inquiries and applications that a bank or other financial institution would require in order to secure a loan.
How do you find a private money lender? Just as you are a private investor, anyone can be a private money lender. In order to find this ‘soft money’, you should first tap your personal network of friends, families, and business contacts. Do not limit your search to your immediate network, rather inquire if any of your contacts know of anyone else who might be interested as well. The more money you can collect from various sources, the more capital you will raise, and the less risk is assumed by each lender, which makes the deal more palatable to them. Finally, you may turn to the internet and search for individuals and private entities that bill themselves as soft money lenders. This is the riskiest of avenues, due to the lack of personal relationship you have with the lender, but can also widen your pool of contacts.
How do you secure the money from a private lender? The key to obtaining soft money is, as previously mentioned, the relationship you have with the lender. An established relationship is the easiest to call upon when seeking funding, which is why your private circle should be the first people you contact. Beyond your inner circle, approach investors with a plan and a good attitude that will lay the foundation for a solid and continuing relationship. If you are able to make a lender feel that they can establish a good relationship with you, they are more likely to invest with you initially. By maintaining a solid relationship, you will also expand your lending pool for your next investment.
Private money lending is a great avenue for funding your first investment in real estate. By obtaining capital and building lasting relationships, you are also building the foundation for future transactions and expanding your network as you expand your portfolio and your resume. A solid plan and a good attitude goes a long way in life as well as in real estate investing.
Property Bridge is part of a nationwide group of investors who are helping tens of thousands of homeowners every year. We may not be the “traditional” route, but we can help and we can do it quickly.
Give us a call today at (662) 545-4700 to let us know what you need help with!