(NOTE: What it's like to write a $1,000,000 check for a sweet piece of undervalued real estate … even if your bank account is overdrawn and you owe the local lawn boy $20? This special report shows you step-by-step.)
Hey Moguls, Chris Seder back again with another terrific lesson…
It’s commonly said that people like to do business with people they Know, Like and Trust. This same principle can be applied to getting money for your real estate deals.
Think about it… who in their right mind is going to write someone a check for $100,000 if they don’t know them? Like them? Trust them?
If you're like me, you would be skeptical of lending your friend money, let alone someone who flips houses. But we also know that flipping houses, if done correctly, is one of the safest vehicles for a potential private lender to park their money.
In the first lesson in this series, we talked about doing market research and finding our sweet spot where deals are going to be super easy to do. Our next step is to start lining up some potential funding so when we do come across killer deals, we know that the money is there.
And, in order to line up private lenders, there’s some critical work we have to do first…
So today, I’m going to cover just that – what you need to do before we even approach private lenders, which involves some crucial preparation. And, I’ll clue you in on some concerns that private lenders may have and some great ways that you can build your credibility to squash those concerns.
Let’s get to it…
The Ultimate Private Lender Package Starts with Preparation
“I've always considered myself to be just average talent and what I have is a ridiculous insane obsessiveness for practice and preparation.”
~Will Smith
You don’t have to be a sales magician to raise private money, and you don’t have to be the best at doing it – but what you need to be is the most prepared. What I mean by that is you need to realize that a private lender is going to fire tons of questions at you (if they don’t that’s a bad sign), and you need to be prepared with every possible answer.
Now, I realize this may be difficult for someone just starting out. I mean, heck, what does a private lender even want to know?
Well, most private lenders have 3 main concerns:
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They want something simple and easy.
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The private lender wants to know that the principle amount they are loaning is adequately secure. They want to make sure that if they loan you $100,000, they are at least going to get that amount back.
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They want a good solid rate of return. Most people who have cash are either investing in mutual funds, CDs or the stock market. And with the stock market, you never know what your investment is going to do… one bad news day and you could lose most of it.
This is why being prepared is so important. If you cannot answer every question or objection a private lender might have, then they will start to doubt you. And we do not want them doubting you.
So, in addition to solid preparation, another way to make sure they don’t doubt you is for you to have credibility…
Incredible Credibility-Building Tactics
There are several ways to gain credibility with a potential private lender:
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Credibility Packet
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A Professional Presentation
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Case Studies (or a mentor's case studies if you do not have any)
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Everything about your company and you
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A Newsletter
One of the best ways to build rapport with a private lender is to have a newsletter that goes out to your list of potential private lenders every month. In my newsletter, I put in what's going on in my business and with my life, something funny, a quick tip or article about investing, and then, if I have a deal I need funded, some brief numbers on the deal.
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A Good, Solid Deal
My favorite way to gain credibility with a potential private lender is to actually have a good, solid deal that I am currently working on, so they can see what I do and how we improve properties.
Or, if you're just starting out, have an actual deal you are looking to get funded.
I will say that if you do not know the person you are talking to, then do not present them with a deal until you have known them for 30 days and/or have made 3 contacts with them. Why? The SEC says you cannot present deals to people you do not have a prior existing relationship with. (More on that next time.)
The Takeaways
Okay, so now you know that preparation is a major factor in the private lending process. And, once you are prepared to answer any and all questions and concerns a private lender may have and have begun to build your credibility with them, you’re well on your way to the next step…
Stay tuned – next time, I’m gonna share with you several ways to find private lenders, and very importantly, we’ll also go over some critical legal stuff that you have to know before you can acquire money from a private lender. (That was the SEC stuff I just mentioned above.)
Anything to Add?
Got any other private money tips? Share below.
Be prepared to answer any questions or objections from a potential private lender.
Compile your private lender credibility packets with everything you can think of about you and your business.
Build rapport by emailing a newsletter, every month, to your list of potential private lenders.
Chris Seder
is a full time real estate investor from Billings MT (yes, Montana has houses), with over 5 years of real estate investing experience. He has grown his own rehabbing business from doing 1 deal in a year to doing over 10 deals consistently. Christopher's father has been Rehabbing and Buying rentals since the early 1980's and has helped Christopher grow his business into a power house in Montana. Christopher specializes in rehabbing, wholesaling and is a Marketing Machine. His knowledge of marketing and creating marketing systems for his business has allowed him to develop several cutting edge marketing campaigns that he has launched across the country. Because of the remote location he lives in (middle of Nowhere MT), Christopher has focused a lot of effort on Virtual Wholesaling, while still rehabbing 10 to 15 houses a year locally. Christopher currently does 2 to 5 virtual wholesale deals a month while enjoying life with his wife and their dogs. Christopher is an author, speaker and real estate investing coach.