Our Best Private Money Sources, Hands Do...

money Today, we're going to talk about something that you have requested – money. Private money. Why is there so much interest in private money? Because we need it to make deals happen. So in this lesson, I’m going to give you all the “goods” you need to get private money…

There are a lot of things we can talk about regarding private money and a whole bunch of directions we can go in, but honestly, what I want to talk about today is where to find private money for your real estate deals – there are a lot of good resources.

Before we get down to business, I want to remind you about another terrific lesson I did about funding, be sure to check it out too.

For now, on with the show…

So, let's answer this money question in its simplest form:

Where do you find private money?

#1. Friends and Family

Let's not overthink this. You simply need to start with your friends and family.

Let me tell you something… all too often, I hear this from those of you who are getting started in real estate investing or are thinking about getting started:

“Ohhh, I am NOT going to ask my friends and family!”

You know what that is? It’s a crock of bull. It’s an excuse that will allow you to FAIL. Meaning, just because you're asking friends and family…

A. It doesn't mean you're going to get it.

And…

B. It doesn't mean you have to take it.

The reality of finding private money is that you really do need to ask anyone and everyone. And when I say anyone and everyone, that means the people who surround you. Ask them. The whole idea with asking friends and family is that it allows you to dust cobwebs off of your pitch. It allows you to get the jitters out of just asking people for money.

Even if you know you don't want to borrow money from friends and families, still ask them. Go through that process because this betters your pitch and builds your confidence by providing you the opportunity to practice asking. By doing so, you’ll be better prepared to ask others.

#2. Professionals

When I say professionals – I mean someone who's very busy with their profession that creates a lot of money: dentists, doctors, attorneys. Any professional who has a lot of money but is very busy on a day-to-day basis.

These professionals need people to help them earn more than a half of percent return in their savings account. And that’s where you come in… the real estate investor securing against the real asset guaranteeing 8%, 10%, 12% returns or more – basically, whatever you negotiate. Which is, of course, more than the returns they’re seeing from the bank and stock market.

#3. Where You Don’t Expect It

The third place to look for private money is other places that you happen to go in your everyday life… and you run into some people – people you never gave a second thought about possibly loaning out their money. Or people who may know of others who might loan out money.

Let me tell you something, when I started doing multiple transactions in our East Coast market in Connecticut, I finally, (after about a year-and-a-half) had a conversation with our attorney who does our closings. I said:

“We need more private lenders.”

And our attorney said:

“Well, why didn't you ask me? I represent private investors who are looking to lend to people just like you.”

So here we are – with our attorney over the course of a year-and-a-half of doing deals, and it just never dawned on me. Who knows how much money we could have made over that year-and-a-half if I had that awareness and had the passing conversation?

So ask your attorney and your escrow company, every month, because guess what… they're dealing with those people – private money people. They are an absolute phenomenal resource.

But also, remember to think about these places as possible sources for finding private money: your gym or fitness club, social events, club meetings – truly any social environment. It just needs to occur to you to have the conversation. You need to share with people that you can make them money….

It's really simple. If you don't ask, you won't get.

Okay, now I’d like to play a little game…

Deal or No Deal?

So, oftentimes, I hear from my students who want to know: Should they invest their own capital in deals or borrow the money and a pay percentage to a private lender? It’s a great question!

So, let’s play Deal or No Deal with this specific scenario:

You, as an investor, need $50,000 for the next deal you’ll be doing… You have that $50,000 in your bank account. But then, a private investor offers you that same $50,000 at a 14% interest rate. You, as the investor, stand to make 30% on that overall deal. So is borrowing that money at 14% a...

(Read the following out loud in a big, booming voice…)

Deal or no deal?

goodbye money Answer:

Hmmm… 14% money versus your own free money. It’s a deal! Take the money from the investor at 14%.

Here's the reason why:

Well, we have two options, right…

We have our own bank account or free money, if you will… but that's actually never a true statement. It's opportunity cost on your money. And that's what I want to teach you right now: You have money available to you with no interest rate – but there is an interest rate and it's called the opportunity cost to that money.

Now you have an investor who’s going to give you money and they want a 14% return, so basically you're going to give up 14% in this potential 30% scenario. A business owner and someone who actually creates a business that works for them instead of them working for it, they do one thing and they think one way:

Leverage other people's time, money, energy, resources and information so that they can do more and make more.

That's all there is to it. If you want to get out of the mom-and-pop mindset that people get stuck in, leverage other people's money.

Here’s what I mean…

Leave some on the table – that $50,000 you have – should be used to invest in business opportunities or investments that will improve your business so you can do five more of those deals. If you took a portion of that $50,000 you have in your bank account and hired a part-time employee or an office person who will allow you to find more deals to make you more 30% returns… that is most definitely a better use of that money.

Again, you’d want to borrow that money for our deal scenario here.

Mogul Elite Members Bonus

Okay guys, as a bonus, we’ve decided to share with you our in-house mind map that we created to follow for our Private Money Closing Process. It walks through the steps that you’ll need to follow when you’re closing a private lender deal… including a pre-closing checklist that we follow 14 days out, another pre-closing process that’s 3-7 days out, what we actually do on the closing day, as well as what we do after the closing day to make sure that when we borrow money, we don’t leave out any of the details.

As you know, there are some details that are unique to this kind of transaction – when you’re borrowing private money. So this checklist will help ensure we don’t leave off any of those details. I highly recommend that you download this checklist in the Power Pack Tools section . It’s basically a system of ours that you can grab and implement in your own business. Have at it, Elite Members.

The Takeaway

So, if you take away one thing, it should be: ask anyone and everyone.

And my tip of the day is worth saying again – ask your attorney and escrow company about their relationships with other people who are looking to lend money and get greater returns. That's where you'll get it.

So, what are you guys waiting for? Go out there and ask anyone and everyone for private money!