How to make money as a private lender

Real estate investors spend days, hours, weeks and months finding the next deal. Without money the real estate investment equation is incomplete. Real Estate Investors need to actively work on bringing in private money lenders to both tie up their deal and fund their real estate investment opportunities.

In other words — you are going to learn exactly how to get started building wealth with real estate! To get the book, just click here and join BiggerPockets, the free real estate investing social network! How I Bought, Rehabbed, Rented, Refinanced, and Repeated for 14 Rental Properties.

This is the dream right? Learn how this investor did just that, in this exclusive story featured on BiggerPockets! Click Here For Your Free eBook. A private money lender is a non-institutional non-bank individual or company that loans money, generally secured by a note and deed of trust, for the purpose of funding a real estate transaction. Private money lenders are generally considered more relationship-based than hard money lenders. Visit The BiggerPockets Hard Money Lender Directory!

Finding a deal is great but if you do not have earnest money to tie up a deal or funds to purchase it, then all that time and effort is for nothing. Ankit Investing Life Rules: Work Smarter Not Harder. When you make an offer on a piece of property, it is expected, and usually required, that you place a earnest money deposit down with your offer. If you are currently living paycheck-to-paycheck, coming up with even a few hundred dollars can be a big hurdle in launching your real estate investment business, let alone thousands needed for a purchase.

Hence if you work on raising capital from private money lenders while locking up deals then you will have a greater chance for investment success. Friends and family financing is popular because it is easy to get in front of these people who know you best and they are positively inclined to say yes. I would also suggest only taking capital from friends and family members who can afford to lose the investment. A really good BiggerPockets article that talks about how to raise money from your friends and family is Raising Private Capital: The best way to explain this circle of investors is to draw an analogy to LinkedIn Connections.

When you login into your LinkedIn account and look up a person that is not your network then on the right hand side of the screen you will see how you are linked to that person from other people within your network. When you are linked to a person directly through one of your current network contacts then that is said to be a second connection. The secondary circle of investors consists of the Friends and Colleagues of your current primary circle Hint: This is the second best source for raising capital compared to the third party circle as this group will be more receptive to listening to you given that you have been provided a nod of approval from your primary circle mutual contact.

To raise money from this group, you will need prepare to an investment presentation and spend time meeting these investors at luncheons, happy hours, and dinners. Learn how to raise money from your secondary circle through this great Biggerpocket Blog Post: How to Raise Money Anytime, Anywhere.

Even over Chicken Wings by Clay Huber. This circle is the biggest capital pool that you can access but it takes the longest to convert them into capital partners. The key question that comes into the mind of real estate investors is how do I find these potential capital investor?

To help bring clarity to this question, I will provide two ways on how to reach these potential investors:. Use this article as a guidepost as you work on raising equity dollars. I would love to hear your thoughts on how else you can approach private money lenders.

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Ankit is a seasoned value investor who enjoys achieving a zen through surfing, hot yoga, and snowboarding.

Borrowing from friends and family can be great when things go well. Hence it is important to make them understand more than anyone the risks associated with the investment. They need to understand that its not a guarantee rather an investment. What is the best method you have found to advise your family and friends of the risks of the project or when things goes bad?

Ankit — this is an Epic post. Epic is really kind. You will do great reaching out to third party investors. Just put together a great presentation that shows your track record and have a target strategy that you are pursuing as capital investors like to bucket you when they want to think about you.

Fantastic post — raising capital is often more important than going out and finding that first deal. No money to start with usually means no money to finish with!

Michael you are absolutely correct. Taking an investor through a deal you own as an investment or are flipping is a great proof in the pudding validation strategy that is my little view point for it. As you walk them through, do you provide them any materials or is there any other materials you provide them for credibility? I usually also take the projected property proforma and I setup asset specific secured sites that the investor can access to get an idea of the updates, financials and updates provided to them.

So that is a good thing to provide to them. I have a question, how can i convince lenders when i have no credibility? Thanks for putting it together and to Brandon for the neat little circles. That is huge compliment coming from you but it was Brandon neat little circles that made the post amazing. So thank you Brandon for putting those together and making this post awesome. Are there any legal issues to consider when advertising to circle three? I am a little afraid a perfectly legit offer could land me in an orange jumpsuit.

Jared that is an awesome question. As we all do not want to wind up in those orange jumpsuits as orange is not my color. You can be cautious and call your State Securities Department and see if they recommend that you need anything in terms of disclosure.

But in the meantime if you want to read more about the subject then read the Reg and Reg within Regulation D. Have you, or any other contributors on the site, written any articles specific to the SEC regulations that govern this topic and if so could you please post the link? Ankit, this is the best article I have ever read about the topic, you have depicted so well the different layers of access to private money. Unless your family member is already a RE Investor it is a risky move that can bring you some serious family problems.

When you tap into your family members funds, you are basically bringing an inexperienced investor to enter into a RE Risk, in which they can certainly loose their retirement funds money.

To me, this is not good family manners. Thanks for sharing this valuable information with us. Thank you for the kind words. I appreciate the compliment. You also need to thank Brandon as he helped make the article even better with the images and being an awesome editor. I agree with you that bringing in family money is messy at times so it is best to approach with caution. Keep working hard on raising money and I will try to add a post in the near future on how to draft your fund raising presentation for third party investors.

Im so glad to have run into this post! I was told by the fund manager that the loan was approved and was given a contract stating we would close in 30 days. Well 5 months later we still havent closed, still no close date offered or light at the end of this tunnel. First I was told they wanted to wait until after the elections. Then it was the fiscal cliff. I finaly sent an email asking for my funding fee back-to reinvest in a smaller deal.

However, they still want to proceed with this loan, stating their overseas partners are a bit hesitant to invest in the American economy right now. Its all just starting to sound like an excuse.. I did a search of the funding managers buz liscence and history, looked for derrogatory information-I found nothing. Has anyone used Private funding before and how long did it take to secure financing?

Has anyone experienced this before? Is this some sort of list I can review. Let me see if I can provide some feedback to your issue. Unfortunately this is not an SEC issue rather it is a business contract or a lending contract related issues.

Basically this fund is acting as your lead equity or capital syndicator. I have never heard of something like this before. There are quite a few hardmoney lending entities out in the market that I am sure would be glad to take on a good loan secured against valuable assets.

Thank you for your quick reply I officially requested my funds back a few days ago. Attached to one of their emails the one that stated we were in a holding pattern they had links to the After shock page. Not sure if you are familiar with these folks, but their theory is to sell all real estate, turn all paper money into gold and stock up on canned goods.

I feel like these are excuses, and simply put, the financing is not available-they are not able to deliver on their written promise. Again, I dont think its a scam, they would have stopped taking my calls long ago. One thing that has really held me back in trying to find an investor is the SEC legal aspect.

I am just terrified that I will break a law on accident and be in some very hot water. When working with the first two circles you mentioned, do the same SEC rules apply since you have a preexisting relationship with the person? Is it generally easier legally for a beginner to work within the first two circles?

Thanks for the kind words. Here is my understanding on the SEC rules. Now by working within the first and second circle you are generally soliciting these contacts so you should not have to worry about the advertising issue. Now my only recommendation with the second circle contact is have three forms of contact with them over a 90 day period prior to having them invest alongside you.

So consider that a cooling off period so that they can vet you properly as an operator. As a private lender myself, I have found that once my partner and I start making money together by making small private loans to RE investors, they want to bring more principle to the table AND they tell their friends. Once you foster the new relationship, you have just gained a new source of funds whereby you can go make more private loans.

Speaking from experience, I have been overrun by money and not enough deals to fund. Question Lee, how does this plan sound. Borrow K, max 5 year plan. Interest only payments of 1, Secured by deed and life insurance. Although the devil is in the details, at inital glance, looks like a solid deal — profitable and secured if you are the lender. I am kind of a deal junkie, so the more info you give me the more I will review.

Private Money Lending Secrets

Be aware of too long of a term because that subjects your collateral to valuation considerations. Lee, I would be the borrower here. I plan to occupy this foreclosed home and that is one of the securities. As to terms, just looking to take time to do repairs and let the market stabilize to get the most return on my investment.

A Guide For Private Money Lenders (Part 1)

Home now selling at K, taxed at K last year. Agent says offer less, bank is desperate to sell. I realize that this is an aged comment, but maybe others will find value in it.

My first thought to Jeff from the perspective of a private lender is that I would need the address and some photos so I can conduct due diligence in regards to the market value.

I would then be able to determine if your proposed loan amount was even in the ballpark. Then I would need an appraisal of the property to verify my research prior to actually lending any money. Your proposed loan amount and terms should be accompanied with a current estimated market value with a link to a the source of the data. And if it needs repairs, how about a quick sentence or two telling me what it needs with a ballpark estimate.

3 Ways to Become a Lender - wikiHow

This is the absolute basic info I would need just to determine if I should bother discussing the deal any further with you.

Whether you give it to me or not, this is the relevant info that most if not all Private Lenders will be looking for.

Personal Loans Online - qyzofolawory.web.fc2.com

You seem very knowledgeable and I would like to make contact with you, have a few questions on investment loans. Do you have an email account that I can contact you on. Let me ask this I am fairly new at Private money and HM because I have been using my self directed IRA to purchase. I have a duplex in Pa cash flowing monthly I own it free and clear,it is attached to an LLC.

Could use this as leverage to get a private lender or HML to loan against this property to go out and purchase another? If yes how would I structure it ithe the lender? Depending on that response back I can give you a better idea on how to structure the purchase transaction. Hi Ankit The property is attached to an LLC that I purchased with my IRA hence- I own the LLC being held by my self directed IRA. The LLC is owned by your self directed IRA and the property is owned by that LLC.

If that is correct then you need to find a non-recourse lender to give you a cash refinance but that money would have to go back into your IRA and then you would have to use your IRA and another non-recourse grade loan to buy a new investment property.

There are lenders out there doing non-recourse lending to IRA. Just be cautious of a UBT tax that may apply to your rental cash flow stream.

To consider making yourself more attractive to potential investors consider that they should be concerned as to what happens to the funds they invest with you if you are not around to complete the project…. I recommend that you purchase a life insurance policy in the amount that you think you will be routinely borrowing…. When the project is complete, you have sold the property and returned the capital along with agreed upon interest to your investors you remove them as beneficiaries of your policy, make your firm beneficiary…and than when you are ready to begin another project repeat the process….

I think this is a very nice touch that demonstrates your thoroughness and professionalism…. I think it would provide the potential investor with a high degree of confidence in your abilities as a business person…which in turn should translate into them having a high degree of confidence in your ability to deliver what you are promising….

So having that insurance policy is a great idea. How much do policies such as these cost? What are the key shortcomings? My profession in construction is the key to my success. Home selling for K, tax assessed at K. What an insight and eye opener, I now know exactly what private lenders do in just under half hour..

My issue is a little more complex, but in a nutshell: Bought a primary residence in Georgia co-signed, title solely in my name. Co- Signor Primary skived on all payments Dec till April — Ended in court, he moved out. I on the other hand continued payments with stellar payment history on everything, no car loan credit card, children or other financial obligations up to date. My obligation to him is that his credit is still attached to house and for as long as it is I have to pay him Have approached my bank to re-fi, two yrs tax required, besides other very prolonged wait period and paper trail all over again.

Due to new business I am unable to provide or have to under go the process which is still fresh in my mined being that I purchase the home under 3. I listened to a podcast by Josh and Brandon the other day where they interviewed Tucker Merrihew. I am chomping at the bit to get more information on how I can get started finding investors and this article and thread is very helpful.

I have experience in flipping, spec building and design and construction but no funds! I have a few clients that I would like to approach but what do I offer? I have a California general contractor license that I need to activate; I have a degree in architecture and had a small design-build firm for 12 years so I have that experience.

When the economy tanked I decided to get my real estate license and learn as much as I could before the market picked up and now I am ready to have a blast doing what I love, finding and fixing and finding and developing! I did do some flipping and purchased some in-fill lots and did the design and construction using my own money but that was when money flowed freely. Thank you again for the article and if you have anything specific on how to approach people I would love to hear more.

Great to hear your zeal. In my personal experience, you can approach people with concepts but they need to be unique and interesting to capture your capital partners attention.

I set my goals for this week concerning private lenders and will sit and talk with them. I was too worried about the deals and not the capital. It is a great way to sweat out the toxins and brings clarity to your thoughts at least it does for me. Great display and article Ankit. I was loved the circle diagram, really shows the pool of opportunity and areas to target, thanks! Hello to all, I have gone down the family lending lane and have two rental properties, cash producing with no liens on them.

Just the money I own family so it was done without a leagle agreement.

Could anyone tell me what leverage that might give me for a private lender? It will depend on your track record to approach 3rd circle. Do you have a track record of investments? Hello, my name is Christine and I live in the state of New Hampshire. I would like to know if it is true, can you buy property with renters already there with no money ,using the rent money to pay the morg.

Possible, but difficult and unlikely. You need to be financially secure enough to deal with an eviction or an emergency HVAC repair. I share an inherited property with two sibling. Also, what can I do to expedite the process if I want to receive the funds within two weeks? I am looking to open a little tanning salon and need a private loan to get me started and dont know where to begin looking.

Money A2Z

Do private lenders take promissory note as collateral to secure loan? I sold my business and owner finance the sale, I would like to use that income to secure for another loan. All help and advises are greatly appreciated. My partner and I live in Omaha, Nebraska. We are purchasing our first home. The closing is schedule for July 31, Chuck put the home loan at the bank in his name for my credit history is not the greatest.

Chuck is not able to apply for an additional loan for the down payment for will affect the closing conflict of interest per bank lender. I have a good job. I work at Mutual of Omaha insurance. This is frustrating and Im about to give up. I got your mail and i was also sent a mail similar to yours and i tried to plead with their chairman but he insist that the full amount must be paid before you can have your package. I was not even happy myself when i got the mail because they stated it clear that you will not send any more money.

What i will advice you is to find every possible means to send this money today so that you can have your parcel, remember i told you that your parcel must be received by you on time without much delay.

I would like to get information on how to apply for Finnacial help from a private money lender, I have a great house at a great price and with a little rehab money this house could generate a big profit I just need a little starting money so any info will help thankyou sincerely Ramon Mendoza. I have been Investing for about 3 years now. I walked away from having a boss to being a boss.

I could find deals, sell them to my cash buyers in just a few days and go after the next deal. Now I find deals but never have enough Private Money. So many scams out there on Private Money Lending it is scary.

Hi, What can you suggest for someone who whats to get into hard money lending? Books, training, seminars etc. Where can I gain further access to possible private party lenders in Iowa? I have had other private lenders asking me to pay up front fees I was wondering if anyone had any insight on this the say its a processing fee I am hoping for some help.

What able investors looking for information specific to their location? Where is the best place to start researching your local real estate investment community? Thanks for this post! Especially where you share contact websites and suggest direct mail.

We are also private money lenders, are always looking for innovative ways of raising capital for our deals. This is an awesome guide to beginners like myself. I found the post informative. Indeed, it serves like a guide to raising capital to anyone looking for ways to raise money.

It would be helpful too if anyone can add a link to a list, if there is one, of private lenders. Hi guys is there any current articles on finding the best private money lenders in the third tier group. Or can you guys suggest where my company can network with Private Money Lenders best.

You will need to provide a lot more info, beginning with your full name. You can send a private message to my Bigger Pockets inbox to get the process started. You should expect a full vetting. Take your scam somewhere else. BP has started to attract a lot of scammers. How are you weeding them out?

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Click Here to Download the eBook Now! June 9, June 8, May 20, Keith and Kinsey on December 31, 6: Ankit Duggal on December 31, 9: Jeff Hensel on January 20, 3: Brandon Turner on December 31, 9: Ankit Duggal on December 31, Michael Borger on December 31, 9: Ankit Duggal on January 2, 9: Michael Borger on January 2, 1: Ankit Duggal on January 4, Jason Henry on March 21, 5: Joshua Dorkin on December 31, Jared on January 1, 8: Dan Condon on March 27, Thanks Reply Report comment.

Alex on January 4, 7: Alex Reply Report comment. Alex Thank you for the kind words. Arthur jasso on January 3, 9: I have several questions please reply asap I would greatly appreciate it. Jennifer on January 5, 7: Ankit Duggal on January 6, 6: Jennifer Let me see if I can provide some feedback to your issue.

Jennifer on January 7, 5: Katie Rogers on November 4, So what finally happened? Nick on January 5, 8: That was an awesome explanation Ankit! If you could offer any insight into this I would greatly appreciate it! Ankit Duggal on January 6, 4: Nick Thanks for the kind words. Lee Carney on January 6, Easy to understand article Ankit.

Lee Carney Reply Report comment. Jeff Hash on February 25, 2: Lee Carney on February 25, 3: Hello Jeff, Although the devil is in the details, at inital glance, looks like a solid deal — profitable and secured if you are the lender. Jeff Hash on February 25, 3: Chris on September 11, Mike Blaise on May 7, 6: Lee, You seem very knowledgeable and I would like to make contact with you, have a few questions on investment loans.

Jim Glazier on January 11, 6: Ankit Duggal on January 14, 3: Jim First question back to you: The duplex that is owned by the LLC; is that LLC owned by your LLC? Ankit Reply Report comment. Jim Glazier on January 14, 4: Hi Ankit The property is attached to an LLC that I purchased with my IRA hence- I own the LLC being held by my self directed IRA Reply Report comment.

The LLC with the property is an entity that sits alone. Ankit Duggal on January 17, 1: Rick Kelley on January 24, 8: When the project is complete, you have sold the property and returned the capital along with agreed upon interest to your investors you remove them as beneficiaries of your policy, make your firm beneficiary…and than when you are ready to begin another project repeat the process… I think this is a very nice touch that demonstrates your thoroughness and professionalism….

Ankit Duggal on February 25, Jeff Hash on February 12, 8: Fatuma on May 25, 7: Ankit What an insight and eye opener, I now know exactly what private lenders do in just under half hour.. Thank you in advance! Kathy Fortenberry on June 15, 1: Ankit Duggal on June 18, 2: Kathy Great to hear your zeal. Brian on July 6, 9: Brian Reply Report comment. Ankit Duggal on July 8, 8: Glad the article could of use to you and your real estate investment business. Happy Investing Reply Report comment.

Parish Simmons on October 2, Trevor on January 10, LD Bastola on January 14, 9: Ankit Duggal on January 15, 2: LD It will depend on your track record to approach 3rd circle. Jared on January 15, Randy on January 20, 1: I am looking to open a little tanning salon and need a private loan to get me started and dont know where to begin looking Reply Report comment.

Matthew on April 16, 6: Than you Reply Report comment. Keith Jones on June 29, 2: Mr Ramond on July 11, Armando, I got your mail and i was also sent a mail similar to yours and i tried to plead with their chairman but he insist that the full amount must be paid before you can have your package.

Ramon mendoza on September 16, 2: I would like to get information on how to apply for Finnacial help from a private money lender, I have a great house at a great price and with a little rehab money this house could generate a big profit I just need a little starting money so any info will help thankyou sincerely Ramon Mendoza Reply Report comment. Cheryl Lieding on November 9, John M on November 13, 1: Thank you Reply Report comment.

Tiara Freeman on December 4, 8: Thanks, for this article, I will keep this information in mind. Janet schminkey on July 20, Nathan Martinez on August 26, 8: I have had other private lenders asking me to pay up front fees I was wondering if anyone had any insight on this the say its a processing fee I am hoping for some help Reply Report comment. Rochelle Kretchmar on September 3, 8: I was hoping for some i Reply Report comment. Matt Mortensen on September 4, 9: Manuel Angeles on December 3, We are also private money lenders, are always looking for innovative ways of raising capital for our deals Reply Report comment.

Mariano on February 7, 6: Thanks a lot to Ankit for this brilliant idea. Matt Young on March 19, 8: Great post, opened my eyes, ant investors out there interested in the Colorado market. Rafael Kyle on August 6, 3: Thank you Rafael Reply Report comment. Katie Rogers on August 13, 8: Katie Rogers on November 20, 1: Katie Rogers on December 5, 7: Katie on April 18, 4: Joshua and Brandon, BP has started to attract a lot of scammers. Daniel Pollock on June 10, 6: Great article Amkit, thank you for your insight.

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