Creating Private Lenders
For some who believe you need your own money to do real estate...that's even if you need money at all....if you can show people you are serious and are making things happen, people will give you money without thinking twice.
By just flapping my lips I was able to tell people what I was doing, a little about how I was doing it, the returns I was making, and that I was always looking for private lenders. I have people ready to cut me checks 10K 20K 30 thousand dollar checks because they believe and trust me. The beautiy of all this, you set your own terms.
Make it worth their while....give them options and let them tell you how they want to get paid. Draft a little booklet and show them some possible returns.
What I show them is:
On a 10K investment, I will give you
0.05 Points
16% interest paid out quarterly
2 months prepayment penalty.
On a 10K investment over the course of 3 months they would receive:
500 from the points charged
400 from the interest
266.66 from the Pre Payment Penalty
A total of $1,166.66 return on their investment.
Play with it. 20% interest no points. 1 month PPP.
the list goes on and on of how you could structure these things. make it worth your while as well as theirs. structure things short term and long term.
Have Fun
Good, to the point, and right on target.
There's lots of $$$ out there for the using, and it just needs to be asked for, and with a clear understanding on both sides as to how & how much is going to be paid back to the investor as his yield.
Realize that these are YOUR private investors and you can market to get whatever type of money you are looking for. Maybe you want low-interest long-term...
The possibilities are endless.
Great reminder an investor at any level!
Well, I wonder if you need to be careful how things are worded and drawn up. I have seen people get in trouble here in Florida for "selling securities" without a license in doing similar things as this (not RE related though). Maybe I am a worry wart because I have a FL insurance license myself and see lots of regulating and fines in the FL Ins newsletter but it was just a thought for you to consider. Partnering is one thing and a loan is another but calling something an investment might be somewhat dangerous. I realize you did not do that in this article but just wanted to warn others.
It is important to note that you said "by flapping your lips".
Somehow, through your own network of family, friends, and business associates, you must find those with money to invest THROUGH WORD OF MOUTH.
Otherwise if you solicit via ads or other public soliciation, you are violating securities laws, and could end up in big trouble if a deal goes bad, and an attorney catches wind of the way in which you found this private investor.
Stay word of mouth, and you can sleep at night knowing you are not entering the highly regulated world of the SEC.
Best of luck, Dave
Not necessarily. I have a good friend nearing the end of his 3 to 5 at the federal prison camp in Terre Haute for just this. He did it all word of mouth. Botom line-- don't loose those folks money.
Can you elaborate on why your friend went to jail? If I am correct, there is nothing illegal about taking out a loan from an individual. If it is a mortgage then they would only get the house if you default, and you are not criminaly liable. In Alabama here, the only licensing that i know of would be required only if i were to take back a mortgage and then sell the note more than once per year or if i were to act as a representative for a lender. Even if I took out an unsecured loan, and defaulted I don't understand how they would hold me criminaly liable. Please explain.
Well my friends specific criminal act was that he allowed people to buy portions of that mortgage. By accepting more than one investor to raise the mortgage amount he converted the mortgage into a security. But this probably doesn't matter. If the states attorney concludes that you are accepting money from mulitple persons and loosing that money then you are almost certainly in violation of some part of the SEC act.