The Creative Investor - The Power of Private Money !

One of the most common problems with new and even novice investors is that they don’t have any money to invest, and or they have shaky credit. The bank wants more documentation and the deal needs done fast! The great thing about being a creative investor is that you can do things that the average person wouldn’t think of doing.

There are a host of topics on this forum that explain how to buy and or make money with real estate ‘unconventionally’. However, I want to remind my fellow investors that Cash

is still King! And if you use your creative methods, in addition to private money, the results can be staggering!

Many investors that I know have no idea on how to fund a deal quickly. Most can go out and find a profitable deal, and then they realize that they have no way to fund it! There are a lot of people yelling for financing help on this board! The Power of Private Money can be the answer to your financing problems and help take you to the next level!

“Are You Talking About Hard Money Lenders?
I’ve heard all this before!”

NO I am not! Although Hard Money Lenders may be a good alternative, and they work for a lot of investors, they are not right for everyone. Hard Money Lenders still have tough requirements that can’t always be met. You wont find houses to buy all the time at 65% Loan to Value. This is a requirement for many HML’s. Don’t count these guys out though, you may need to lean on them someday if all else falls through!

“If you are not talking about Hard Money Lenders, where else would I get quick cash from”?

Great Question! Don’t let the simplicity of this answer draw you away! Your money people are Private Individuals! You wouldn’t believe how much liquid cash that private individuals have. Some regularly keep their money in CD’s, Mutual Funds, IRA’s, etc. They do this because they want a return on their money! Do you think you can offer them a higher return than they are getting in the items listed above? I know I can, and I do!

“How Do I locate Someone with Private Money!”

The bad news is that they probably wont come seeking you out, so you will have to go and seek them out. This is a numbers game, just like real estate is. So in order to make this successful, you will have to put some effort in it. If you are not interested in putting effort into finding funding partners, it may be better for you to stay at your J.O.B. !

These people are relatively easy to find. You will find them simply by talking with people, telling them what you do, and what you are looking for. Word gets around quick! These people are everywhere; your next door neighbor, your church friends, your country club buddies, etc.

One of the easiest ways to get in front of these people is to meet with local professionals that you know.

1) Your Attorney

You would fall off your chair if you knew how much money your attorney handled. I sat down with my attorney and asked him if he represented anyone that had extra dollars at their disposal. Do you know what he did?........ He laughed at me! He can put in me in touch with more people that have money than I could ever possibly use!

2) Your Accountant or CPA - Same advice!

“Why Would These People Give Me An Unsecured Loan?”

They wouldn’t! You would offer them x amount return on their money Secured by Real Estate. Via a 2nd mortgage! Someone once said that “Money Follows Opportunity”. Private individuals will still want to know the details of a transaction. That’s no problem! Show them that you have done your homework, by providing them with the details, and also show them the projected profit, for added security of their investment and for their peace of mind. If you show them the profit, someday, they may ask for a larger piece of the action. When that comes, throw them a bone or two, or simply start using another Private Money Individual!

“How Much Do I Offer Them?”

Some individuals will lend you the money at 8-10% per annum, and others may want a flat amount of 40% of the profit. The more of these guys that you put in your back pocket, the more choosy you can be on percentages. You could generally expect to pay between 10-14% per annum. The difference with using a private individual vs. a Private Money Lender (company) is that after a few deals, and you have built up a trust level, you will be able to use this money for many things. You could borrow only a small amount from them to bring a mortgage current and buy Subject-To, you could Short Sale a large 2nd mortgage, and borrow the cash to pay it, etc. This is where being a Creative Investor will take you to the next level!

“What If I Can’t Find People With Liquid Cash?”

My first response would be that you are not looking hard enough! If indeed you fall into a pickle, there is still hope. Some individuals may not have large amounts of cash on hand, but rather a tremendous amount of assets! These are the people who can have access to LARGE Lines of Credit! These people are just as great to work with!

#1 They feel more secure that they are not putting up their personal money (even though they are responsible for it)

#2 They can make money with none of their money invested!

You may have to pay a little more for this situation, because you will be paying the interest on the loan, plus give them a flat fee of the profit in the transaction. Anywhere from 10% - 40% of the profit! If it is a worse case scenario and you have to use someone like this to fund the deal, just remember that you wouldn’t be able to do the transaction without them. Besides your 60%+ of the profit may be all that you need to take you to the next level of investing!

If you want to go to the next level in Real Estate Investing, you may want to take the next 4 weeks and do nothing but seek out private individuals with cash or access to large lines of credit! Put several of these private money people on your call list and stay in contact regularly! And when your next transaction comes to fruition, you will see that there is Power in Private Money!

“BAMZ”