Looking for private investors? It is not easy, but it is completely possible. Private money is an amazing thing, and it will make real estate investing so much easier once you find it. If you find a deal–I mean a real money maker, the money will always be there.
Step one: Target prospective investors
First, you need prospects, right? You need to target people who CAN (if they decide to) give you money. Some ideas are relatives, friends, co-workers, doctors, dentists, lawyer, accountant, neighbors, etc. Once you have a couple prospects you need to know what to tell them.
Step two: Create a plan for both you and them
[You] Buy houses in need of repair at substantially less than fair market value. Renovate the house and resell it quickly to an owner/occupant for a profit. We call this retailing.
[Them] They lend you money at 10%, 12%, even 15% simple interest for a term of twelve months. You pay them interest only payments monthly, quarterly, or whatever you agree. You promise them you will not ask for more than 70% of the after repair value ensuring their loan will be protected by sufficient equity should the deal go bad.
You give them a title insurance policy, a homeowners insurance policy, a first mortgage position, a personally signed promissory note, and an appraisal on the property. You share with them your plan of what you are going to do to the house (buy, fix, sell, etc.).
Step three: Turn your plan into marketing tool
Now that you have a plan, convert it into a marketing tool you can use to recruit private investors. Create an “Introduction” to your opportunity explaining what it is you do and what you can offer them.
Jazz it up with questions like, “Are you happy earning 4.9% on your CDs? If not, I can help.” Stuff like that will keep their attention. Put this Introduction in the hands of all of your prospects.
Step four: Prepare your presentation
Prepare a presentation to sell this opportunity to your prospect. Create a package building your credibility, for instance, a credit report, list of assets, previous deals, referral letters, employment information, whatever makes you look good. Present the opportunity educating your prospect on what Private Lending has to offer. Pay, pay, pay them back and do another deal.
Here’s how I did it
I have successfully raised over $1.3 million in private money for real estate in the last eighteen months. I found two people–one started me out with $100k; he is now up to $500k, and the other started me out with $50k, then $100k. I showed him how he can make money by raising money from other people.
He has since raised over $700k from family and friends, and he takes three points off of every deal they do with me. Half of his people use their IRA accounts and run it through Equity Trust Company in Ohio. This guy now makes about $50k a year raising money for real estate for me. Sweet, isn’t it? Good luck!