Using Private Money to Fund Your Real Estate Deals
Posted on February 26, 2010
Filed Under Foreclosures Investing |
One of the most valuable abilities you can have at your disposal as a quick turn real estate investor is the ability to raise cash from private sources to meet any funding need. If you become an expert at raising private money you will have developed a skill that is highly valuable to you as well as to those you work with.
The potential uses of funds from private money are limited only by the bounds of your creativity, but there are some common scenarios where they can be applied to great effect. For rehab investors (you or your buyers) private funds can be used for purchase and repair costs and paid back when the property is sold or refinanced.
If a juicy deal is about to go down the tubes due to a premature foreclosure, you can use private funds to postpone the foreclosure and save the deal, paying the money back when it closes. Another instance where fast private funding can come in handy is any time you want to execute a double closing and the title company requires that you have the cash on hand for the purchase.
This money can be borrowed and paid back extremely quickly, perhaps within a few days. There may also be a circumstance where an individual who can’t qualify for conventional financing has enough equity in a property to convince a private lender to lend money for a purchase or refinance.
Who are private lenders? Basically they’re ordinary people, with the qualifying feature that they have some sort of substantial savings or assets that are not earning them a significant return. This might exist in the form of cash in a savings account or CD, in the form of low yield bonds or stocks, or it might be held in the form of a self directed IRA.
It is important to realize that your private lender does not necessarily have to loan you the cash themselves, but can use their assets to secure a loan on your behalf from a conventional lending institution. For example, if your private lender owns some municipal bonds earning 6% which she is willing to pledge to secure a loan on your behalf, you could offer her a 6% return on the cash you borrow and she would double her earnings, since her bonds would continue to earn 6% while you are using the cash.
Knowing who private lenders are is important, but so is knowing how to acquire their contact information. If you handle your business appropriately finding these individuals should happen on a regular basis.
There are three techniques to build your list of private lenders.
The first is networking; as you talk to your colleagues and others in the business, make a habit of asking what private lenders they use and granting favors in exchange for referrals. The second is canvassing your existing wholesale buyers by asking them if they lend money for real estate transactions. The third is cultivating new private lenders by asking “Have you considered investing in real estate?” whenever you encounter a qualified individual.
Negotiating with private lenders should not be difficult. Simply offer them security with a low LTV and guaranteed repayment and an interest rate that will be better than what they’re already getting, and ask for reasonable terms in exchange: long term or short term amortization, a balloon note at the date of your choice, no monthly payments; these are all reasonable things to ask for if your deal is solid.
Omar Johnson
http://www.articlesbase.com/real-estate-articles/using-private-money-to-fund-your-real-estate-deals-391035.html
Comments
7 Responses to “Using Private Money to Fund Your Real Estate Deals”
Leave a Reply
i just got this weird e-mail should i just delete it?
Greeting
Hope this mail will find you in good health and lot of cheers.
I am Amber Ahmadkhan the only son of late Mr and Mrs Anwer Ahmadkhan . My father was a very wealthy cocoa merchant based in Abidjan, the economic capital of Ivory Coast before he was poisoned to death by his business associates on one of their outing to discus on a business deal.
When my mother died, my father took me so special because we are motherless. Before the death of my father on 30th Febuary 2006 in a private hospital here in Abidjan.
He secretly called me on his bedside and told me that he has a sum of $ 12.500.000 (Twelve Million, five hundred thousand dollars) left in a suspence account in one of the local bank here in Abidjan, that he used my name as his first son for the next of kin in deposit of the fund.
He also explained to me that it was because of this wealth and some huge amount of money his business associates supposed to balance him from the deal they had that he was poisoned by his business associates, that I should seek for a God fearing foreign partner in a country of my choice where I will transfer this money and use it for investment purpose, (such as real estate management).
Dearest, i am honourably seeking your assistance in the following ways.1) To provide a Bank account where this money would be transferred to.2) To serve as the guardian of this since I am a boy of 23 years.
Moreover dear, i am willing to offer you some % of the sum as compensation for effort input after the successful transfer of this fund to your designate account overseas.
Hope to hear from you soonest AT amber_ahmadkhan@yahoo.fr
Yours Sincerly..
Amber Ahmadkhan
Delete it; it’s just another scam/spam email.
References :
DELETE THE SCAM!
References :
Yes, just ignore it and delete it…
I get those every day!.. I recognize them because of the big $$$$$ in them… most of them tell the same story but some change the story a bit.. but they are all false and trying to still you money, bank account #, etc… just ignore them.. because you could receive them from various different emails and even "family" they might even have the same last name as you and start telling you about the money you got from a dead family member that you dont even knew…
Just delete it..
CHRIS
References :
No! A lot of people send e-mails like that, hoping to get bank acount numbers and pins, or just wondering who will respond. Just delete it, thats wwhat I would do.
References :
delete the email message and mark it as spam.
it’s a scam
ignore it. never answer these kinds of messages. EVER.
References :
Delete this immediatly. this is a huge scam that has just been going around. it was on oprah. someone will email you with a long story about how they need money, etc to make people sympathize then take all their money. and also, woulnt it be a clue if it was a boy whose name was amber!? ugh
References :