Speaker 1: In today's video, I'm going to be going over
how to find private money lenders, as well as what private money lenders look for in their deals,
as well as what exactly is a private money lender. To start with, a private money lender could really
be anyone. A lot of times it's going to be a real estate agent, a real estate investor,
a mortgage lender, someone that understands the real estate business and has been successful
and has a lot of cash just sitting around and they're looking to obviously deploy that cash
and get some type of return. If they understand the real estate in business and they understand
how to evaluate deals, then they can make these private money loans or hard money loans
to real estate investors. Usually it's going to be on a 6 to 12 month term
where the real estate investor is either going to fix it up and flip it or fix it up and refinance.
The terms and points and interest rates, they're going to vary from investor to investor.
My private money lenders right now, one of them charges me 1 point and 8%, and the other charges
me 2 points and 10%, which is both pretty good. If you compare that to hard money, oftentimes hard
money rates are going to be significantly higher. In this case, hard money rates recently have come
down a little bit, but you're still probably going to be paying 2 points and at least 10%,
if not more than that. That's the first benefit of a private money lender versus a hard money lender,
the rates. You're probably going to get better rates with a private money lender.
The other benefits of working with a private money lender is, if I find a good enough deal for my
private money lender, oftentimes they will pay for the entire purchase price of the property. If I
find a great deal, usually they look for about 70% of ARV. If you're familiar with the ARV formula,
the MAO formula, it basically states you take the after renovated value, multiply it times .7
and then subtract for the cost of repairs. If you can come anywhere close to that with
a private money lender and they're a nice, cool, laid back type of private money lender,
a lot of times they may pay for the entire purchase price of the property. That's a lot
different than a hard money lender. Oftentimes, it's hard money lenders, even if you find a great
deal, unless you've worked with this hard money lender 10 or 20 times, they're still going to
require that you bring a substantial amount to the table. Well, a substantial, I mean usually
about 10% to the table. Usually at a minimum. Because they want some skin in the game because
the hard money lenders are a little bit... They might do more deals, they might see more things,
so they just need to be a little bit more conservative with all their underwriting.
Then, the next reason that I prefer private money over hard money is that private money
lenders are going to be much less of a hassle to work with. A hard money lender, like I mentioned,
they get a lot of people sending them deals, so they have to be a little bit more strict.
A hard money lender's going to ask you for a 100 different documents, they're going to want
to see your last 10 properties, they're going to want your biography, they're going to want
your social security number. They're going to want so much information. You're going to have
to send them a full packet of information before you even get considered for a loan.
Whereas, with my private money lenders, I've done a few deals with them.
I basically just send them a property, I say here's the after innovative value,
here's what I'm going to do with it, it's going to take about six months, and they say, "Okay,
cool. I'll send the money. When is closing?" The rates, the flexibility, being hassle-free, private
money is definitely something you want to do. Now let's talk about how to actually find these
private money lenders. The very first way, and I can guarantee you, 100% guarantee you
that you will be able to find some private money lenders this way, is to reach out to your mortgage
officer or mortgage loan officer, and if you don't have one, just you can do a Google search and look
for local loan officers or just ask a friend or family member who's purchased properties recently.
They probably know a mortgage loan officer. You want to reach out to that person and ask them
if anyone in their company does hard money or private money lending. Sometimes those terms are
interchangeable. But somebody that is working at a loan brokerage, they're going to have people that
are successful at that company, understand the loan business, and do this hard money lending,
private money lending as a side gig. I know one investor in particular, actually, he's
one of my private money lenders. He made 400K in the previous year just doing private money lending
as a side gig, which is not bad, because he has a lot of cash, he understands the business. He only
lends on safe deals and he only lends to mostly experienced investors. But if you bring him a
good deal, he'll probably lend on that as well. That's the first way. Don't be afraid to talk
to any loan officer. They are always reaching out to people. They love talking to people, so
feel free to reach out. They're always trying to sell people on something.
Speaker 2: Limited time offer only on everything.
Speaker 1: I'm a real estate agent as well, so I'm always
trying to sell someone as well. But definitely reach out to several. Reach out to local
loan officers and see what... I can guarantee you someone in their company does hard money lending.
The next way to find hard money lenders is to ask your CPA or pretty much any professional.
Everyone wants to get into real estate investing, right? No matter what industry it is, if that
person's successful, chances are they might dabble a little bit in real estate investing.
My CPA, I didn't even ask him. He actually told me. He's like, "Hey, you should talk to people.
They do some hard money and private money lending." Pretty much any profession,
I know attorneys that do it, title company people. There's a ton of different professionals that will
want to get into real estate investment if you can bring them a good deal. The hardest part is
finding a good deal. Once you find a good deal, and I have videos exactly on how to find good.
If you find a good deal, the money's going to be out there. There's a lot of people that are
looking, that have money sitting around that are looking to deploy it somewhere.
The next place is real estate networking events. These could be REIA meetings, meetup groups,
any type of real estate networking event, and I would not discount any of them because
I've been to real estate events in the crappiest motels in the worst part of town,
and there were people that owned 200 or 300 units and you would never expect it. These
were people wearing jeans and a t-shirt. I don't even know how I even ended up in these rooms,
but I'm always looking for different networking events and things like that.
What's funny and interesting about looking for private money lenders, it's always the people
that you almost least expect. The person that's wearing the sunglasses, has the suit, has the BMW,
buys the big house and look like they're rich, they're almost never the actual
richest person there. It's usually the people that are wearing the jeans and the t-shirt.
I could tell you so many countless stories. If you've read The Millionaire Next Door, they
talk about the person that is the millionaire is not the person that's trying to flex on everyone
and make it appear that they're rich. It's usually the low key person driving the Corolla
that has a million dollars in their stock account, owns their house free and clear,
and doesn't need to overcompensate for all their insecurities that they're rich.
Never discount any... I remember I was at a seminar with everyone was wearing a suit.
It was a multifamily investing seminar. Everyone was wearing a suit and people were talking about
doing these big deals, and then the person that got up and started speaking on stage,
she was this lady that wasn't even really that nicely dressed or wasn't even talking to anyone.
She didn't appear... She wasn't wearing the suit and look like all
Wall Street or anything like that, so people weren't really talking to her,
and she was the one that owned more real estate than pretty much all of these people combined
that thought they were really cool. Try to go to as many networking events as possible and
really talk to everyone, because they might know someone or they might be an investor themselves.
Next up is Facebook groups. I know that might sound a little cheesy, but I can guarantee you,
if I were to go on my DC area Facebook group right now and just type in lender or private
money lender or hard money lender, I would get a list of 10 or 20 people. Some of those
are going to be more traditional hard money lenders that might be a little more strict,
but I can guarantee you there's going to be some private money lenders on there.
Right now, just from a Facebook group, this is in addition to private money lending, I'm
evaluating a 10 unit deal. What else am I doing? I'm meeting up with some joint venture partners.
We're talking about marketing strategies. There's a lot of value you can get from a Facebook group.
You don't need to go on there every single day, but what's cool about Facebook, you can just
search within the groups. You can search private money lenders, you can search this, that, whatever
it is you need. Definitely check those out. A lot of times, a city might have two or three
pretty big real estate investing Facebook groups. I'm in the Washington DC market. I think we have
two or three. Every now and then I'll go in there and check and see what's going on.
I don't stay up-to-date every single day, but there is some value that you can have from those.
The next way and one of the most important ways is to have an email list. At the bottom of this page
here, I have a link to my website, which there's a free download for some real estate investing
tools, and people can get on my email list. Every now and then when I need to raise money for a
deal, I might send out an email saying, "Hey, this is what I'm looking for. If you're interested, let
me know." I have people that respond all the time that'll say, "Yeah, I can invest this much, that
much." If you build up a pretty substantial email list, you'll be able to fund almost any deal.
If you have 1,000 people on your list, yeah, you could probably find some people,
but imagine if you had 5 or 10 or even 20,000 people on your list. Many of the top real
estate investors nationwide, what they'll do is they might offer free training, mentoring,
free gifts for signing up on their email list, and they'll keep people posted on their deals,
and then when they have a deal, they'll do some type of webinar explaining the deal, and then for
people that are interested in investing in that deal, they'll sign up. You should sign up for
mine as well because I'm always looking for good private money lenders for my off-market deals.
Now, what do private money lenders look for when they're going to lend money to an investor like
yourself? Number one, they want to make sure it's a good deal. That's the most important
thing. If you just send them any MLS deal, they could lend on it, but they're not going to lend
that much. If you want a private money lender to lend for the full purchase price because you don't
have a lot of cash, you're going to have to bring them a 70% ARV type of deal. You're going to have
to bring them a very good off-market deal. The second thing they're going to look for is
experience. Now, it's okay if you don't have any experience,
but you want to have a basic plan of what you're going to do with the property.
That leads me to the point number three, which is a simple type of deal. I had a deal I was looking
at actually from a Facebook group. It was a 9 or 10 unit apartment building, but it was short term,
and some of these units didn't even have kitchens or bathrooms, and it was actually zoned as a
five unit. It appraised for 650, but then I was supposed to buy it at 625. There wasn't a huge
discount there and it was just a weird deal that I couldn't even really wrap my head around it,
much less, I couldn't really explain that to my private money lender. Why would they
lend on that deal? What's the upside here? Whereas, another deal that I did recently,
which was a very simple type of deal, was I said, "I'm purchasing this property at 320. Here's the
comps. It's worth about 450 right now. Give me six months to refinance it. I'm going to do some minor
repairs and we should be good." That's a simple type of deal. You're buying it at a discount,
doing a little bit of repairs to increase the value. That's the type of deals they look for,
so if you can find a great deal and really keep it simple for the private money lender.
A lot of times they're looking for deals, they're hungry for deals, and they're going
to be less strict than the hard money lenders. Something to keep in mind with private money
lenders is, once you do that first deal with them successfully, you pay them back, they get their
interest, you make a profit on the deal, that just solidifies the relationship right there
and they will be willing to lend you more money on more deals. Sometimes they'll refer you to other
people. You really want to focus on those first two or three deals, and really that first deal to
solidify that relationship. Do everything you can to pay them back quickly, be diligent about it,
and your context will increase, your private money will increase.
If you're interested in investing in any of my ideals, check out the link below and you
can sign up and I can keep you posted on any deals. Also, I do offer some mentoring and
coaching. If you're interested in becoming a real estate investor, doing your first deal,
getting to two or three deals per month, check out the links below and get in touch
with me and we can go from there. Thanks for watching. I'll see you on the next one. Bye.