Everyone gushes about the brilliance of private money, and they’re right. Private money is fast, cheaper than hard money, and easy to come by – if you know how to find it.
There are three keys to obtaining a private money loan.
- Be likeable.
- Be trustworthy
- Be competent.
I know I’ve talked about it a time or twelve, but raising private money for your real estate will be in direct proportion to your ability to build rapport. A strong rapport with people is created when they like you, trust you and have confidence in your competence.
First, to get them to like you, you must first like them. Don’t look at a potential lender like a cash machine. They are human beings with thoughts, opinions and personalities. Not every lender is going to be a right fit either – so keep that in mind. Genuinely like them, and you’ll be in the vicinity of developing a relationship that will benefit you both.
Second, have them trust you. It’s a simple formula – Say what you’ll do, and do what you say. Every time. If you do that, you’ll float like oil on water, separating yourself from the hordes of people who spew empty promises.
Third, get them to have confidence in your competence. For this to happen, and I’m sorry there’s no way around it, you have to be doing deals successfully and profitably. The private money fountain won’t start flowing to you until you have a few wins under your belt, that’s just the way it goes.
If you haven’t completed a deal or aren’t doing them on a regular basis, please click here to access my free real estate investing course – it’s free (unlike private money).
Assuming you’re doing deals, sharing your successes is the easiest way to establish confidence in your ability.
Don’t keep you victories a secret, but don’t brag about them either.
Let others know about your wins, but only when they ask.
If you hang out for a a minute, I’ll tell you what I mean and how I got my first private money loan.
In the beginning of my real estate investing career people would ask me, “Hey Matt, what have you been up to?” My reply was, “Well I’m flipping a few short sales a month. Things are really good.”
Those who wanted to be involved in real estate would then ask, “How do you do it?”
I’d explain my process and, as a bonus, convey that I’m doing it successfully.
Before long, people were asking me out to coffee or lunch so they could ‘pick my brain’. These meetings didn’t always lead to a lender, sometimes I was just helping someone out (nothing wrong with that), but one day over coffee I found my first private money partner.
The conversation went like this.
Toward the end of the meeting, I said to the woman, “So, you probably wouldn’t be asking me all of these questions if you didn’t plan on profiting from real estate in some way?”
She said, “Well, yea. I’d like to invest.”
To which I responded, “If you plan on doing that, you probably have some resources to pull it off right? What are you working with?”
“I’ve got 100k in the bank, and I’d like to put that to use.”
So I said, “I’ll tell you what. Why don’t we partner on a deal? You put in the 100k. I’ll put in the rest; I’ll do the work. You can do the deal right along with me, and learn as we go. At the end, you’ll get your $100,000 back and we’ll split the profit. Does that make sense?”
Three years later, she still funds some of my deals. However now, instead of a 50/50 split, she prefers to lend the money at a simple 8% interest only monthly payment and a 10% profit share on the back-end (I like this arrangement).
This is a relationship business.
I know I harp on that fact a lot, but it IS. It’s not about dollar signs and properties – those are the END PRODUCT. It’s about the people. Make it about them, and you’ll be amazed at the success that will find you.
If you’re not consistently doing deals, it’s time to get in the game. Go here. Win some. Then word of your competence will spread throughout the community, and people will be asking you if you have a project they can lend on. It’s not easy, but it really is that simple. As long as people like you, trust you and have confidence in your competence… the private money world can be your oyster.