Working With Private Lenders


Raising money and working with private lenders is an integral part of the real estate investing business. Even if you don’t have a need for private money right now, there will most likely be a time in the near future that you will. It could be on a 20 unit commercial building that came out of nowhere or a small single family rehab. For some investors, their whole business is predicated on using other people’s money. Without private financing, they would not be able to close the deals they do. How you go about getting these lenders to work with you has more to do with yourself and the type of deals you present than you may have thought.

It may seem like an obvious concept, but people that lend their own money want to be protected. They did not make their money by taking on speculative deals or trying to swing for the fences all the time. With that in mind, they want to make sure that the deal is strong and they are protected. A small profit on a secure deal will keep them wanting to work with you again. If you bring them a speculative deal without any collateral, you should expect them to pass or not work with you down the road.

Many new investors who are looking for private money think that if they come to a meeting with charts and graphs they will win them over. Of course it is important to be prepared and to know everything about the property, but private investors want to feel comfortable with who they are investing with more than the actual property. Like most everything else in business, developing relationships are critical. You can certainly develop this over time and after a few deals, but to get to that point they have to either like you or love the property. Your personality will go a long way. The more comfortable they are with you personally, the more likely they will want to work with you.

The final decision making factor is knowing what you bring to the table over everyone else. How are your deals or the way you work them different from every other investor looking for money? You may be able to do work on the properties or you may be a licensed realtor or mortgage broker. Whatever sets you apart and makes you stand out is what you have to focus on. Even if your local investing area is small, there may be at least half a dozen other investors that they already have an established relationship with. If you can answer why they would work with you, it will set you apart from everyone else and give them a reason to keep you in mind down the road.

Having access to private financing can open doors you may have never thought of in the real estate business. Even if you don’t have an immediate need, you never know what turns your business may take down the road.