Of all the many components of creating, manipulating, and closing real estate deals, one of the most mystifying, especially for newcomers, can be the securing of money with which to work. As with most of life’s endeavors, real estate transactions are lubricated by a good stream of readily available cash, and having this resource can mean the difference between a successful career and a static struggle with getting things done.
Of course, the amounts of money involved in real estate transactions tends to be large enough to make it unlikely that a real estate investor has the necessary funds lying around. For the vast majority of deals, a loan of some sort is necessary.
But while the obvious route is to seek loans from banks and other similar institutions, this method carries a number of drawbacks. First of all, it forces the borrower to accept and abide by terms rather than allowing them any flexibility at the outset. More importantly, not every real estate investor is blessed with a stellar credit rating, or at least, the kind of credit rating that would help secure substantial loans from financial institutions. There’s certainly something to be said for making an effort to improve one’s credit rating, but for the purposes of real estate investing, focusing all your energy on this one tactic is likely to take up a fair amount of fairly precious time.
Contrary to popular belief, borrowing funds from financial institutions isn’t the only –or even the best– way to get started with real estate investing. There’s a great deal of potential in the ability to approach and appease private lenders. Private real estate lenders are an abundant resource that tend to go untapped by a large percentage of newer investors, owing mostly to the simple conviction that this alternative route is a myth or too much of a mystery to figure out. The truth, however, is that finding private real estate investors isn’t all that difficult in terms of strategy. It just requires an open perspective and a will to succeed –along with the work ethic to back it all up.
So how do you find private real estate lenders? There are a variety of creative ways to get started. One of the more obvious options is to visit, and, if possible, join your local real estate associations and other organizations. Making a positive impression with a basic introduction of your background and where you intend to take your business can give you an immediate “in” with local private investors. You can make it known at these organizations that you’re actively looking for investment partners, drawing potentially many lenders to you with one simple at of outreach.
Another important and relatively straightforward way to get the ball rolling on securing funds is to advertise. Sure, it carries an upfront cost you’ll have to account for later when the cash comes tumbling in from sales, but the sheer power of this medium is often enough to warrant the initial sacrifice. As it’s a good idea to stay local with private lenders, advertising in the “real world” as opposed to starting online campaigns is usually more effective.
Fliers and signs can be erected, either formally with advertising agencies or on the cheap with paste and go ads on telephone poles and other highly visible public places. A good idea for the latter option is to check with local ordinances to make sure you won’t accrue any fines or fees for the activity, as this varies greatly from place to place. Professionally placed signs and advertisements for private lenders are appropriate in all the familiar hot spots, from bus stops and kiosks to billboards and beyond.
Getting the word out that you’re looking to create mutually beneficial investing partnerships is key to taking advantage of the private lending route. Tell your friends and business contacts, append your outgoing emails with a notice, print a message on the backs of your business cards, and always be on the lookout for more common-sense ways to make your plans known throughout the local community. When you make your intentions a living and intregal part of your every day life, you’ll begin to attract others who see and appreciate your point of view.
A slightly trickier way to locate solid leads for private real estate lending is to take a trip to your local courthouse. Once there, take a look at the country mortgage documents. You’ll likely find that these records are quite ample, and they may seem daunting at first. But the number of records in these tomes is a good thing when you’re looking for private investors.
The method here is to take along a recording device of choice, whether it’s a voice recorder, a laptop or handheld, or good old fashioned pen and paper, and copy all the names and pertinent contact information for everyone listed as a mortgage lien holder. A number of these people will simply be those who have extended owner financing on their previously owned properties, but a significant portion will consist of private real estate lenders. Contacting these people and introducing yourself as well as your plans for business and a discussion of interest rates can lead to meaningful partnerships and opportunities down the line.
Far from being limited to the realm of experts, alternative methods for financing real estate investment projects are accessible to anyone with a goal and the willingness to see it through. In the process of carrying out these tasks, you’re likely to find yourself inventing brand new ways to improve your chances of working with one or many private lenders, helping to diversify and grow your business as you close deals and realize profits. With the power of an open mind and the creativity necessary for staying competitive in a fierce market, a world of opportunities is possible.