Would you like to buy an investment property? Do you believe it’s unobtainable because you cannot qualify for a mortgage? Well, you’re not alone. There are millions of people in the same predicament. There is a method of financing real estate, however, that bypasses the rules and regulations of banks. There is nothing risky, questionable or untoward about this method. It could not be simpler, and it is this: borrow real estate investment funds from private individuals. In real estate circles this is known as private money.
There are a number of advantages to borrowing private money for your real estate transactions. For one, you don’t have to deal with all the time-consuming procedures associated with processing a bank loan; no arbitrary rules, no complex paperwork, no faxes – in short, no hassles. Moreover, there are no loan origination fees, and a private mortgage will not show up on your credit report. This will free up your credit for other purchases. The best advantage, though, is that you get your money quickly and therefore never have to miss out on a great deal. In real estate, the early bird gets the worm!
Potential sources of private money are endless. Once you get some experience, you may consider conducting seminars as a way to attract prospective lenders. When first starting out, however, it is best to approach family, friends and acquaintances. Prospects also include neighbors, co-workers, and service providers such as mechanics, hairdressers, and doctors. The need to develop and solidify these relationships cannot be overstated. For once you develop a track record and win the trust of lenders, they will not only refer more lenders to you, but also will bring you deals on additional properties. Your pool of private money sources and real estate deals can be interminable.
How does one develop successful relationships with private lenders? How do you persuade them to pony up the cash? Your first and most crucial step is to write up a business plan. This document will serve as a road map and communication tool for your real estate investing business. It should include fundamental information such as the amount of money needed, the expected rate of return, the profit potential, and when the loan will be repaid.
Your verbal communication skills play just as important a role as your written document. This is your opportunity to make a memorable impression and persuade your prospective lenders of the benefits they will enjoy by investing with you. Tune them into everybody’s favorite radio station – WIIFM (What’s In It For Me) . Emphasize that your real estate investment property will yield higher interest rates than their retirement or savings account. And assure them that their money is secured by the underlying real estate.
Private money is a viable alternative to conventional methods of financing real estate investment property. You get your money quicker and without all the hassles associated with a conventional mortgage. Your family, friends and circle of acquaintances can be an endless source of funds. Armed with an excellent business plan and persuasive communication skills, there is no end to the relationships you can cultivate – and by extension money you can raise – to make your dreams of owning investment property a reality.