Private Money Lender: How to Get Them and How to Keep Them Long-Term
Finding a private money lender is an essential part of any real estate investor’s business. One of the keys to finding a good private money lender is determining if they have similar goals and objectives as yours. So how you determine if you and the potential private money lender have similar goals. You need to discuss your plan and ask questions similar to a job interview. Finding a private money lender is an essential part of any real estate investor’s business. In the old days (pre 2006) you could easily get a mortgage or even hard money loan simply by showing up in the lenders office and filling out an application. If you could walk and talk you qualified for a loan.
But today in the post credit-bubble market those days are over. Getting money for your real estate investing business is much more difficult and likely to get even more difficult as the credit markets sort things out. So how do you get money for your real estate investment business?
The answer is a private money lender.
One of the keys to finding a good private money lender is determining if they have similar goals and objectives as yours. You need to understand what they are trying to achieve and if your private lending program fits their needs. For example, if the private money lender wants an investment for a 10 year period, but you plan on doing quick flips every 6 months, it will not be a good long-term relationship. You and your private money lender need to have similar goals for a good long-term relationship that will result in repeat business.
So how do you determine if you and the potential private money lender have similar goals. You need to discuss your plan and ask questions similar to a job interview. We would recommend a series of questions similar to those listed below. Obviously, you can modified these questions to fit your personality, but the information you get will go a long way in determining if this is a person you want to do business with.
Important Questions to Ask
• How much do you have in liquid funds?
• Do you have other monies you might want to consider for an investment program that pays 9% to 15% and secured by local real estate?
• What type of investments are you in right now?
• How much are they making on your current investments?
• How long do you want your money invested for and do you have plans coming up that will require your principal back?
• How available is your money or is it tied up in investments that are not readily accessible?
• Are you a “Qualified Investor” (person must either have a net worth of about a million dollars or have an annual income in excess of $200,000)
• Do you know anything about real estate investing?
• When would like to start investing?
Asking these questions will flush out how close your goals are and will foster a good long-term relationship.
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