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How to find Hard / Private Money
Date: Friday, October 31, 2003 @ 10:39 AM EST
All real estate investors sometimes in their real estate investing career run out of money to purchase properties. Are you
one of them?
There is a light in the dark tunnel of real estate investing in finding people who will be willing to fund your real estate
investment projects.
Three Groups:
1. Hard Money Broker-Working for commission as POINTS to do the loan. 12 to18% Interest only payments on short-term
loan for 6 months to 12 months THEN a balloon payment is due.
2. Private Individuals who have large CDs or IRAs Accounts. You have to market your service to them.
3. Professional Lenders who are known as being “CASH RICH” in their community. They can get the cash in an
emergencies.
Where to find these groups?
1. Hard Money Brokers are found to be representing an entity. For example go to www.realestatelink.net Under their
section of HARD MONEY LENDERS. There are a list of companies who will lend you money based on the equity of the
property not on your credit-worthiness.
2. Private Individuals who have retired having money in a CD Money Market or IRA Account. These people can be found
through marketing your service as a real estate investor by running Newspaper Ads or use small post cards explaining
your needs are.
3. Professional Lenders can be found in the professional community such as doctors, lawyers, anyone who is a
“professional business person.” The best method to reach these people is to have a “Business Seminar On Finding
People Who are willing to lend you $20k to $1,000,000 for your real estate deals.
4. You might want to try a local investment club in your area. You may find some money people looking to do deal with
other investors.
5. You need to be careful in soliciting private money investors if you don’t have a Private Placement Memorandum filed
with your State Security Exchange Commission which a lawyer charges $25,000 to do it for you.
This PPM gives you the right to advertise for private money from private individuals! Without the PPM you will be breaking
the State Securities law of the State you reside in. Or you can become a mortgage broker whom is licensed to advertised
for private money through private individuals.
To avoid breaking any laws of the State you reside in when you solicit other people’s money to be used for investment
purposes you’re asking for trouble. A better approach might be to advertise for “business partners.”
Example: “Business Partner. Earn 9 to 12% on your money. Call Rob @ 800-345-6789 for details.”
What can you use private money for? To purchase single family homes for rehabbing, to catch up back payments on
foreclosure properties, or to purchase subject to properties using the existing mortgage in the sellers’ name ( having the
seller sign over his deed to you and you put it into a LLC or Land Trust with you as the Benefactor for the property.) Getting
the seller out from under the ownership of the property by paying the back payments and perhaps giving $1,500 to $2,000
to the owner to move out of the home also you are saving the owners credit!
You can also used private money to do down payments on contract for deed or mortgages and perhaps small apartment
complexes but you will have to ALERT the private lenders on how you are going to use their money beneficially. You have
to convince the private money lender to go outside of their COMFORT ZONE! There is a side note of expenses you have as
an investor:
1. Your operating costs
2. You have to pay yourself a salary.
What is your relationship going to be with the private money lender?
1. Become a FRIEND with the private money lender! Friends will lend to FRIENDS whom they trust.
2. You begin to BUILD trust by showing clearly how they are benefiting from the deals you do with their money.
What are the benefits?
1. Their money and interest is secured by issuing a SECURITY DOCUMENT provided by the title company through their
attorney stating clearly their names are on the Deed of Trust or Mortgage. And how their money is drawing a high interest
per month perhaps beginning at 12% up to 15% compared to their CDs and IRA Accounts.
2. They are getting paid monthly into their accounts interest only payments. Money Markets are getting 1.8% interest today
and the money being lend to you as a real estate investor is 12 to 15% extremely difference in bank rate of interest than
from their interest rate in real estate deals that you are making with the use of private lender’s money!!!
3. Private money is a short-term loan for 2 to 3 years with no points and no prepayment penalty!
4. Title companies can have their lawyers prepare a lien note on the property securing their loan. Paying 18% for 12
months and reduced to 12% second year and third year reduced to 9% interest.
You need to communicate clearly your program of action to the private money lender.
Present facts of the deals as a ROAD MAP: Think on what is involved in the deal? Have documentations!
1. Pictures of the property
2. Cash Flow Chart
3. Who are part of your TEAM? This involves real estate agents/brokers, attorneys and title companies.
4. Always show how the profits are being divided between you the investor and the private money lender.
Important note: Always have a resource of people whom you can contact for private money before looking deals!!!
Educate yourself in finding private money lenders. Purchase a course or two from experienced investors who have found
private money lenders themselves THEN copy their system until their system becomes YOURS!!!
This article comes from The Creative Investor
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