In today’s tough economic situation, finding investors to fund your real estate business can be extremely challenging. Private money lenders are a hot commodity for real estate investors, in the current market scenario, where the deals available have high earning potential but funds are not readily available from conventional sources. Finding the right investor partners or private money lenders can help real estate professionals clinch top deals.
Successful real estate investments require two basic ingredients, which are funds and the knowledge to put them in real estate that can deliver good returns in the quickest possible time. Apart from private money lenders, funding can also be done by enlisting passive partners, who generally provide the funds for the investment operation but do not normally get involved in the decision-making process. The biggest problem facing real estate professionals is how to find the right investor partners and/or private lenders to ensure a steady source of income.
Private lenders lend their money to real estate companies to earn better returns than other forms of investment. The terms and conditions may vary with each lender. With private lenders, access to funds is easier and the interest rates are comparatively lower than typical financial institutions and hard money lenders. The question is how to find them?
Your friends and family with strong financial resources and willingness to invest in real estate can be a good and safe source of private funding. A one-lender-per-project approach can help you manage funds and projects better. Some friends may be extra eager to put in their funds, while those with a conservative approach to investment may not be all that enthusiastic. Your past record and the ability to do a great presentation on the potential of the real estate market can turn them around to loosen the purse strings for you.
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A more practical approach is to meet up private lenders who are already lending to real estate businesses. You can have an easy time here because these lenders already know the value of real estate investment, so you won’t have to ‘sell’ them the idea. You just have to ask for names from other investors, search for recent sale details, or simply put an advertisement in local newspapers to find the best one. Local lenders will know the real estate market and value of properties in the locality better than investors from other places, so your job is just to convince them about your company and its ability to earn smart profits.
Convincing private lenders to invest can be easy, if you arrange a detailed business plan presentation during the first meeting. Make sure you highlight your top deals from the past to show you can deliver. If you are a first-timer, display your extensive knowledge and expertise of the real estate business. Investors can sniff out a committed person from one who flips from one idea to another.
It is important to convince private money lenders that their money is secure. Do not hesitate to give them a personal guarantee, if they want one just to let them know their money is in safe hands. Negotiate tough for the best interest rates. This can send a subtle signal that you are a no-nonsense businessperson who knows what exactly you want from the arrangement.
Finding low-priced properties in areas with promising economic futures, and associating with investor partners has proven to be the key to success of many real estate investment businesses. Just because you have the expertise and they have the money is not a formula for guaranteed success.
Before you decide to partner with someone, make sure that they have similar fundamental objectives for their real estate investing. For example, if you believe that a property can have a cash flow within 12-24 months but need a holding time of 10-15 years for exponentially greater earnings, your partner must have a similar mindset too else the partnership can have frequent frictions. It is important to begin with the end objective in focus.
Finding investor partners is relatively easy than finding private lenders. You can approach local real estate communities, private investor clubs, or spread the word through friends and relatives to find several quality investors.
Karrie Morton is an online marketing associate of HomePropertySearch.net - provides real estate services. Karrie’s interest range from providing improvement tips on home and yard. She also loves finding new ideas for home improvement projects. Connect with Karrie through her social media accounts.
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