Is It Time To Sell Your Primary And Become A Renter?

 

In 2006 I was listening to some local talk radio show when the guest speaker said, ‘I’ve sold my home and moved into an apartment, the market is going to crash and I want out."  I thought this dude was a real fool. 

Turns out he was not - I was the fool.  I stuck in there with all my properties and suffered for years until the prices came back too close to where I purchased the homes in 2006.  It took only 15 years!  Now I am out and just have the primary, but is still remember the talk show from 2006 that still haunts me, sell your primary, and move into a rental. 

Is history repeating itself?  Are we heading for another crash?  Some are saying that this time,  it is going to be the mother of all crashes, greater than 2006.  Somehow, I get the feeling (at 3 AM every night) that there may be some truth to this. 

If I would have sold everything in 2006, I would have had a boatload of moola, put it in the bank, and took a 7-8 year vacation.  If I put the boatload of moola into the stock market, or heck bitcoin or gold I could have lived a rich man's life for years.  But no.  I suffered for 15 years with rental homes and got out.  I did not lose any money and came out way ahead.  But now what?  Sell the primary and move into an apartment? Are you crazy?

The reason I did not sell the primary in 2006 was that I was afraid of:

I would never be able to get back in.  If homes keep going up and up, then in a few years it's going to cost millions to purchase.  Better buy now before you cannot.  If you do not get in, you going to get screwed.  Look at the price going up and up.  If you rent, you are going to be a renter forever. You are going to be a loser dude.

These are the same thoughts I have now in 2021.  

The value of the home, over the past 12 months has skyrocketed.  It is up to a point where I wonder who would pay that much money for that little ranch home?  And if it sold it, what would I do with the moola?  What are the tax consequences for selling and renting?  Also, what are you going to do with all that stuff in the house? 

It would not be a problem selling.  I have seen hot markets in the past, but nothing like this.  All I must do is say, ‘I think I am going to sell’, and there would be a flood of offers. Would not have to even list the home.  (LOL, If you’re reading this I’m not selling, maybe, could be, so don’t call me, and yes, I’m a licensed agent.)

So, what should I do?  Sell the primary, then what?

This time around I am not going to sell the primary.  The reasons are:

• --My wife likes the home, and she wants to stay.   She said she would have no problem if I pulled the trigger and sold, (I am a lucky guy), but I know it would be stressful for her.  She said, “I trust your judgment”.
• --It is paid for.  So, who cares? (But I could have a boatload of moola to do what with?)
• --Do not know where we would move.
• --I am getting old and more am interested in knee replacement surgery, and cataract surgery.

So, this time around, even though I think we are in for a mother of great rest, I am not selling.  Going to ride it out, hunker down, stock up food, and buy ammo.  Will this be a mistake?  Do not know, but it is just my primary, what could go wrong?  After all, banks do not crash, and stock markets do not crash, we will not go into a war, interest rates will never go up.  Democrats have it all under control. 

So tonight, at 3 AM I not going to wake up in a panic, hopefully.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Tel: 623-582-4444
Level4Funding.com

 

Private Hard Money Lender
Dennis@Level4Funding.com

Who is this Dude? Dennis brings with him substantial experience in residential real estate. Dennis has extensive experience purchasing, renting, and selling numerous homes over the past 45 years. His first purchase was a property in California when he was 18 years old.   Dennis graduated from California State University Pomona with majors in Computer Science and Business Management. He is a Licensed Mortgage Broker, Licensed Mortgage Originator, Licensed Real Estate Agent, Licensed Insurance Agent, Certified Sort Sales Specialist (CSS), Certified Negotiator (CNE), and FAA Licensed Private Pilot. 

Private Hard Money Lender in California, Texas and Arizona: Ultimate Private Lending Guide: How To Get Started

Private Hard Money Lender in California, Texas and Arizona: Ultimate Private Lending Guide: How To Get Started: Investing in real estate is essentially one of the smartest and safest strategies to promote wealth building. With the proper foundation and...

Ultimate Private Lending Guide: How To Get Started

Investing in real estate is essentially one of the smartest and safest strategies to promote wealth building. With the proper foundation and knowledge, investing in real estate can be highly lucrative for anyone. But let us be honest, you already knew that. However, of particular interest is what an investor can do with the money they make from a profitable career.

While a portion of profits will undoubtedly be allocated to the lifestyle of their choice, investors are advised to be smart with their money. Of course, you can reinvest into another property, but if you are looking for an alternative, there may be one option you have not considered yet: private lending. 

Investors who have the funds to do so should consider private money lending in real estate. This process offers the same type of underlying security and profit potential as rehabbing or wholesaling, but without acquiring new properties.

What Is Private Money Lending?

Private money lending is when individuals lend their own capital to other investors or professionally managed real estate funds while securing said loan with a mortgage against real estate. Essentially, private money lending serves as an alternative to traditional lending institutions, like big banks.

As rookie investors gain experience, they strive to aim higher. Leaving your hard-earned money in a savings account is no way to protect and grow your assets. At the end of the day,
Arizona private hard money lending allows you to secure a loan with real estate that is worth much more than the loan. In some ways, this process can be less risky than owning real estate. That is why it is important to familiarize yourself with the best real estate financing options available to today’s investors.

In the past, real estate financing typically came from banks, government agencies, insurance companies, and pension funds. However, with a list of strict requirements and a timeline not conducive to the average real estate investor, a need for alternative lending sources quickly developed. At the same time, it became obvious to those with appropriate funds that their money could better serve investors than large institutions. Now, private money lending is a critical component of the real estate investment industry. In fact, its presence makes it more possible for the average investor to run and maintain a sustainable career.

If you were unaware, there are several benefits involved for those who choose to lend private money. If done correctly, offering alternative real estate financing options can mitigate risk while simultaneously establishing wealth. Of course, this is not a path for everyone. You need to ask yourself if you can afford to do so. Having a little extra money in the bank does not necessarily mean you should throw it at the first investor who comes your way. If you are equipped to mitigate potential risks and take advantage of the opportunities that present themselves, private money lending may warrant your consideration.

You may want to consider private hard money lending if one of the following applies to you:

• You are a real estate investor looking to expand your portfolio.
• You are a doctor, lawyer, CEO, or professional of another kind who has a great income or a surplus of cash.
• You have a sizable retirement savings account.
• You are a retiree looking for passive income investment.
• You are the owner of an estate or other trust fund.
• You are a tech entrepreneur who owns a successful start-up.
• You are a lottery winner.
• You want to and can help out a friend or family member.

Still on the fence? Do not worry; the following will answer any questions or concerns you may have about pursuing a private money lending business:

The Anatomy Of A Private Money Loan

The concept of a private money loan is relatively simple. Three elements are required for a loan of this nature to transpire: a borrower, a lender, and a lot of paperwork.

For all intents and purposes, private money lending is perhaps your best chance to invest in real estate with no money of your own. If for nothing else, private money loans can provide for investors in need. While they seem to serve the same purpose as traditional lending institutions, there are several key differences. Private money loans typically charge higher rates than banks, but they are also more available in cases an average bank would pass on. Additionally, banks and other financial institutions typically do not provide the same combination of speed and transparency in the decision-making process.

How To Become a Private Money Lender

As I mentioned above, private money lending can offer several benefits for everyone involved. It is not uncommon for investors to eventually expand into private money lending themselves due to these benefits. If you are interested in private money lending, there are a few steps you can follow:

• Establish your business and obtain the required insurance.
• Meet with a lawyer to create your company structure.
• Identify your preferred lending focus.
• Join a peer-to-peer lending platform or network to find possible investments.
• Evaluate any potential clients by calculating potential returns and risk levels.
• Start your business in private money lending.

Private Money Lending: How To Identify Borrowers

The concept of private money lending Arizona is relatively simple: without money, real estate investing does not exist. Money, like in every other industry, is the lifeblood of an investor. Real estate investors need to actively work on securing private money loans to fund their deals. Often, the average investor cannot fund a deal with their own money. Moreover, even if the funds are readily available, investors will seek the assistance of private money. Regardless of a particular investor’s situation, there is a particular likelihood of them needing private money assistance. Instead of having to pool money or stretch every dollar, investors are given more options to grow their businesses using private money.

Perhaps even more important is the speed and efficiency in which private money may be obtained. The speed of implementation is critical to an investor, and it can mean the difference between closing on a deal and losing one. Having the money promptly can make it that much easier to close a deal.

With Arizona private hard money lending, you will be confronted with several types of borrowers. While each is unique, they are all looking for the same thing. Here are the four types of borrowers you may encounter:

Rehab/Sell: This type of investor will typically purchase a residential property and complete renovations with the intention of reselling it once the project is complete. Borrowers in this sector find private money attractive because conventional banks will often not lend to properties in poor condition. Perhaps even more importantly, access to private money is more conducive to a timely and profitable flip.

Rehab/Rent: These investors typically purchase a residential property and complete renovations with the intention of renting the property for cash flow purposes. These borrowers find private money attractive for the same reasons as investors in the rehab/sell category.

Builders/Developers: Builders and developers will purchase vacant land to permit and develop into residential or commercial use. Borrowers in this sector are interested in private money primarily based on the speed with which the funds can be available. Also, many banks will not lend on speculative development.

Commercial Investors: This population of investors may seek to use private money as a “bridge loan” for commercial property when a conventional bank will not lend on an un-stabilized asset.

Money Lending: How To Get Paid

Private money lending in Arizona is attractive because of the flexibility it offers, not only to borrowers but also to lenders. You see, with a traditional loan, lenders will generate income through interest payments made by the borrower. On the other hand, private loans allow lenders to negotiate exactly how (and when) they will be paid back for the loan. This opportunity opens several perks not traditionally offered to investors. Read through the following agreements to learn more about making money as a private lender.

Joint Ventures: As a private hard money lender near me, a profit split can be one of the most attractive options for financing investment. Investors can negotiate to receive a percentage of the final profits in this type of agreement. The amount will vary based on the contract and the investment, though it could be quite profitable. In some cases, private money lenders will even find borrowers who propose this option. Just make sure you believe in the potential success of the deal, and you are all set.

Exit Fees: This loan structure requires the borrower to pay a predetermined amount at the end of the loan term. The exit fee is often negotiated as a percentage of the overall price of the investment. In some cases, lenders may even negotiate an increasing exit fee that changes depending on when the loan is paid in full. For example, if the borrower needed a few extra months to repay the loan, then they would pay a larger exit fee.

Interest Payments: As I mentioned above, interest payments are one of several ways to generate income from a private money loan. In fact, this is the most common setup in private money. Lenders can set an interest rate at the time of the loan approval and sit back and wait for the money to arrive. Typically, private money loans are associated with higher interest rates than other loans, making this a particularly attractive arrangement for lenders.

Points: Points are essentially fees paid by borrowers in exchange for lower interest rates. Points are calculated as percentages of the overall loan, with one point referring to one percent of the loan amount. Some lenders prefer this system because points allow them to be paid in larger sums, with additional interest payments to follow. More often than not, points are paid at the beginning of the loan term and are suggested by the borrower as an incentive for granting the loan.

Become A Private Money Lender: Tips From The Pros

Simply put: private money lending in Arizona allows you to act as the bank for other investors. Rather than directly purchasing assets, you get the opportunity to fund those owned by colleagues and partners. By now, you likely realize how beneficial this setup can be. However, there are a few more things you should know before getting started. Read through the following tips before taking on your first deal as a private money lender:

Start Out Small: Identify a range you are comfortable working with and stick to it. The number one mistake private money lenders make when starting out is spreading themselves too thin. Assess your finances and your preferred level of risk and create clear guidelines for potential projects. If someone approaches you searching for more than you want to offer, do not be afraid to refer them elsewhere.

Find A Good Attorney: Becoming an Arizona private money lender does not make you a lawyer. You will still need help when it comes to negotiating and reviewing contracts. Additionally, if you start a private money lending business, there are several legal protections you need to have in place before getting started. Find a qualified real estate attorney in your area and bring them on to your team. Their role in your company will be invaluable over time.

Work Locally: There are profitable real estate deals all over the country; however, there are also deals right under your nose. If you decide to start your private money lending business locally, you can meet face to face with investors. Additionally, you will likely be more available for communications and future investment options. Do not underestimate the potential of your own market; you never know what kind of deals may come your way. You can always expand in the future.

Be Transparent: Avoid inflating your portfolio or background to attract potential investments. No matter what point you are at in your investing career, let your work speak for itself. You do not want to misrepresent yourself or your lending business. Always maintain transparency and stay true to your mission and values.

Do not Forget About Yourself: Remember, just because you aren’t purchasing assets directly does not mean you aren’t an investor. Continue your professional and financial education even if you opt for the role of lender. You still need to stay on top of market trends, financial news, and other factors impacting the real estate world. While you do not have a hands-on role in the investments you finance, you still need to have strong business acumen.

Learn The Subject Matter: Review the types of borrowers listed above and familiarize yourself with the different deal types. Learn what factors go into a successful rehab, buy and hold, or rental property. That way, when a borrower pitches a deal, you know how to evaluate it for yourself. Obviously, they will paint the investment in a good light, but is it profitable? To be a successful private money lender, it is crucial to understand exactly what goes on in the niche you choose to invest in.

What Is Hard Money Lending

An Arizona hard money lending is another alternative to traditional lending sources and allows borrowers to use the investment (in many cases, a property) as collateral on the loan. While many lending sources rely on a borrower’s credit history, hard money lending relies on the asset in question. Hard money lending will typically require higher interest fees than traditional loans but can provide borrowers with increased access to capital and a more lenient approval process. Investors with low credit and high equity in a property will often turn to hard money for funding. Additionally, property owners at risk of foreclosure may also utilize hard money loans.

How To Become An Arizona Hard Money Lender

Hard money lending can represent a unique opportunity for investors with extra capital on their hands. Though, with any financial decision, it is important to mind due to diligence and premeditates any potential risks. If you are interested in becoming a hard money lender, here are a few steps you can follow:

Name your business and create your company structure.

Set up an online presence for your business.

Seek legal counseling on the creation of a limited liability company.

Investigate potential investment opportunities.

Make a business plan and draft the criteria of future loans.

Project the future financial outcome of any potential loans.

Launch your hard money lending business.

Pros Of Hard Money Lending

Hard money lending gives investors the chance to stay active in real estate without necessarily adding a property to their portfolios. Some hard money lenders may never purchase a property themselves at all. This can be a huge perk for anyone without the time and resources to acquire a real estate deal, as it allows lenders to tap into the lucrative potential of real estate without “getting their hands dirty,” so to speak.

Another major benefit of hard money lending is the degree of control it offers. Hard money lenders get the final say in who they work with and on what terms. Anyone who has purchased a piece of real estate likely remembers the process of applying for funds, waiting on application approvals, and going through negotiations. Being a hard money lender puts you in the driver’s seat—and that is quite an attractive perk for many.

Cons Of Hard Money Lending

With any financial opportunity, there are going to be cons involved. For those interested in hard money lending, the most obvious challenge is coming up with enough capital to get started. The number of funds required can serve as a steep barrier to entry, but it’s important to remember that real estate offers a great way in. Investors can work their way up by managing successful real estate deals themselves; over time, they can generate the funds necessary to start lending.

Hard money lending also has an inherent degree of risk for the lender. By operating outside of the traditional loan application process that big banks use, hard money lenders can truly choose who they work with. This means taking a risk on an investor who may not be approved by some standards. To counteract this risk, hard money lenders must come up with standards of their own. Lenders should be prepared to research investors, properties and ultimately trust their gut feeling about a potential candidate.

involve anyone with a little extra cash they want to invest.  Hard money lenders are similar; however, they are typically more organized and semi-institutional.  Decide which is best for you and your deal by reviewing the last part of our series.

Summary

Private money lending can represent an attractive opportunity for both parties involved. Investors seeking alternative financing sources will find the benefits include a faster approval process and increased access to funding. On the other hand, those lending may find they have unique access to potential investments and deals. No matter which side of the transaction you are on, private lending is a viable option for expanding your financial portfolio and wealth building.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Tel: 623-582-4444
Level4Funding.com

Private Hard Money Lender
Dennis@Level4Funding.com

Who is this Dude? Dennis brings with him substantial experience in residential real estate. Dennis has extensive experience purchasing, renting, and selling numerous homes over the past 45 years. His first purchase was a property in California when he was 18 years old.   Dennis graduated from California State University Pomona with majors in Computer Science and Business Management. He is a Licensed Mortgage Broker, Licensed Mortgage Originator, Licensed Real Estate Agent, Licensed Insurance Agent Certified Sort Sales Specialist (CSS), Certified Negotiator (CNE), and FAA Licensed Private Pilot. 

How To Find an Arizona Private Lenders For Real Estate

Find an Arizona Private Lenders For Real Estate

When you first get started in real estate, you may look at your colleagues and wonder how to find private investors for real estate deals. Often, investors are using private real estate lenders to fund properties. There are many private lenders out there, but the most challenging aspect can be to find one that is willing to fund your deal. However, with the right mindset and preparation, you will be sure to find private real estate lenders who will want to help you.

1. Understand The Anatomy Of Private Real Estate Loans

Financing terms, especially when you are first starting out, can be quite confusing. Are private lenders the same as hard money lenders? If not, what are the differences?

Basically, private lenders refer to individuals not affiliated with a financial institution who lend funds to promising investors. Either from a private investor or someone within your social circle who is decided to invest in your venture.

Hard money lives in a middle ground between the two. Hard money lenders are usually affiliated with a more traditional financial institution but have less strict standards. (This comes at a price: generally higher interest rates.) Though hard money is technically private money lenders, you will generally want to distinguish between the two as an investor.

In addition, it is important to know exactly what kind of information a private lender will be looking for. In many cases, private real estate lenders will have experience investing directly in properties themselves. Therefore, they will know exactly which numbers and areas to look at when considering a certain deal. While it is important to build a positive relationship with a potential lender, be prepared to answer questions about the facts and figures of a given deal. Here are a few questions to prepare for when looking for private real estate loans:

Will they get their money back?

What is the incentive to invest?

What are the risks involved?

How will you secure my investment?

Is your plan well-researched, and it is achievable?

2. Build A Network

Unlike securing a loan from a bank—or a hard money lender—working with private lenders is all about building relationships. This starts with developing a solid investor network.

It is a good idea to begin building your network on two fronts. First, get to know professionals in your industry, such as real estate agents, fellow investors, title companies, attorneys, and private investors. Many private lenders will come through referrals within your own real estate network.

Second, it is a good idea to build your contact list from people outside of the real estate industry. This includes friends, family, colleagues, and anyone who is not currently an investor but might be looking for new opportunities. Many aspiring investors may just be waiting for a good opportunity to come around before getting started. Alternately, some of your friends and colleagues may have valuable connections outside of your existing network.

Always approach potential connections with respect and keep these networking tips in mind. Remember, it will take time to create positive relationships with fellow professionals, but it will open many doors in your career. Building a strong investment network is crucial to finding private lenders to work with.

3. Prepare Your Materials

Put together the materials that you would be sharing with private lenders during your pitch.  This includes a company overview covering your education, goals, past deals, and experience, and what makes you the right investor for their funds.

Along with this information, you will want to prepare a presentation or video that outlines previous properties you have worked with. This should outline the success of past deals, including pictures, numbers, and relevant information. You do not need to include every single property you have completed and instead should select the properties that show your best work. Remember you want to make a good impression and highlight your strengths.

One more thing to add to your to-do list, which may not be as tangible as a company overview or introductory video, is to have a clear understanding of the private investor process. Look into the documents you will need to present to investors, such as a promissory note and insurance. Also, write out important information like how long the process will take, when they can expect to see the loan paid in full, and what happens if there are multiple investors. Going in with this information will ensure you are prepared for any questions that come your way during the pitch.

4. Select Your Arizona Private Lender

Finding private lenders might be tough at first, but it is important to keep in mind that the relationship is a two-way street. Although you will spend time pitching to potential investors and trying to impress them, you will want to make sure that the lender you ultimately choose will serve your needs and not just the other way around.

First, make sure to ask them about their proposed loan term and interest rate and what the loan will be based on. This will help you find out how long you will have to pay the loan back and how quickly it will accrue interest. Further, you will want to know if they prefer to make their loans based on the property’s current value, or after-repair value. Next, be sure to inquire about potential fees they charge, whether they are upfront or in the form of penalties. Finally, find out the schedule at which the lender will disperse their funds to you.

Based on this information, you will be able to identify which private loan will present the least amount of risk to you.

5. Make The Pitch

Finalizing a deal with a private lender is about far more than explaining the numbers and going over the property. You need to put your potential partner at ease and make sure you are on the same page.

To establish this rapport, go into your initial pitch meeting focused squarely on educating them about the process. Then, keep building that relationship piece-by-piece. Resist the temptation to go for the quick sale or fast deal; it will not work — and it may leave you in worse shape than when you started.

Instead, focus on answering questions, especially those referring to profit splits and timelines. This is what most private investors are worried about. And the more you can put them at ease by thinking of things from their point of view, the more likely you are to secure private financing

Pro Tips For Securing An Arizona Private Hard Money Lender

Private real estate lenders are not nearly as hard as many new investors make them out to be. In fact, many private lending companies are always looking for investors to lend their money to. The trick, however, is proving that you can manage their money well. For more of an idea of how to find private money lenders and convince them you are the right choice, try following these steps:

Understand Negotiation Tactics: In securing private money lenders, investors will need to learn how to speak their language. That said, there are two strategies to consider: the hard sell and the soft sell. The former, the hard sell, is a more professional approach that will have investors develop a convincing elevator pitch. The idea is to sell the private money lender on the idea of funding an attractive deal. In this situation, it is important to remember private lenders are just as eager to work with investors as investors are to work with them; both parties stand to make money on a successful deal. Therefore, investors will want to approach lenders with all necessary information and prove to the lender that the numbers are correct. Doing so should convince lenders that they are making the right decision. On the other hand, the soft sell is typically reserved for friends and family and will typically involve an indirect approach. More specifically, the soft sell will catch the interest of investors by casually slipping an opportunity into a conversation. Either way, investors need to know who they are talking to before they begin negotiations.

Find Lenders Online: Proceed to find lenders using every method possible, not the least of which will include online searches. There are several online sources designed to connect private money lenders with potential investors, all of which may be found with a simple, localized Google search. However, one of the best online search’s investors may initiate is one that looks for local real estate investor meetups. Look for a local REI group and find out when they meet next. Attending a local REI meeting will connect investors with several industry professionals, many of whom may be private money lenders themselves.

Cold Call: Investors should try every outlet at their disposal, and cold calls are no exception. Obtain a list of lenders online and begin to call each name. When doing so, be as upfront as possible and lay everything out on the table. Proceed to tell them everything they will want to hear about the deal and be prepared to answer a lot of questions. That said, the initial phone call is more of an introduction. Instead of working the deal out on the phone, schedule a meeting to go over things in more detail later.

Launch A Marketing Campaign: Not unlike looking for a deal, investors should market for private money lenders. There are many marketing campaigns to consider, but investors shouldn’t limit themselves to just one; try them all. A direct mail marketing campaign, for example, will have investors soliciting potential lenders through a highly targeted mailing campaign. Another idea is to place a sign on any property that is currently being worked on. Place a sign in the yard that suggests you are looking for a private money lender to fund the next deal and to inquire within.

 

Private Money Lenders FAQ

Working with private lenders is not a complex process, though it can be mysterious for investors unfamiliar with alternative financing methods. As you begin to ask how to find private lenders, make sure you do not have any lingering confusion about the process. Read through the following frequently asked questions to make sure when you do find a private lender to work with, you know what to expect:

How Do Private Hard Money Lenders Work?

Private lenders work by investing their capital into real estate deals in exchange for interest paid on the loan. They will work with investors to establish the loan terms, which will be paid back according to the term. Private lenders are often investors and turn to private lending to expand their portfolios.

Are Private Lenders Regulated?

State and federal lending laws regulate private lenders. Depending on where they are located, there is often a limit to the number of loans they can provide without a license. So, while private lenders are not regulated as strictly as bankers, they must follow the rules. For more information on the regulations in your state, be sure to research online.

Do Private Money Lenders Check Credit Scores?

Unlike their hard money counterparts, private money lenders are not known for checking borrowers’ credit scores. That is not to say all private money lenders do not check credit scores before lending, but rather that the decision to loan is based primarily on the asset at hand. Otherwise known as asset-based lending, private money lenders will typically base most of their decision to lend on the quality of the subject property. The more likely the property is to sell for a profit, the more likely a private money lender will lend funds to an investor. Of course, the asset at hand is merely part of the decision-making process. Many private money lenders will want to know who they are lending to, which could result in some questions, not the least of which may include a credit score check. That said, not all private money lenders will look at a borrower’s credit score. Only those who are more diligent will typically consider the credit score when lending.

Is It Legal To Pool Private Money?

It is legal to pool private money, assuming you follow the proper legal frameworks. In fact, pooling private money has become an increasingly popular form of financing in recent years. Though, it is more commonly referred to by a different name: crowdsourcing. Real estate investors have leaned into the emergence of crowdsourcing platforms, such as Yieldstreet, to finance new deals. There are some state and federal regulations to be aware of. For example, there are limits on the amount real estate investors can fundraise when pooling lenders.

Best Private Lending Companies

Private lending companies will offer the same benefits of working directly with a private lender, though the application and approval structure may look different. There are many personal loan companies and peer to peer lending platforms that investors can consider. Here are some of the best private lending companies out there:

LightStream: This particular outlet offers loans for auto, home improvement and just about anything else, at low rates for anyone who may demonstrate a propensity for good credit.

Upstart: Upstart is an online lending marketplace that specializes in personal loans using non-traditional variables to determine creditworthiness.

LendingClub: LendingClub is a peer-to-peer lending company, headquartered in San Francisco, California.

Citizens Bank: Citizens Bank offers personal and business banking, student loans, home equity products, credit cards, and more.

Best Egg: Best Egg is a fast and efficient lending platform investors may tap to secure relatively low interest rates.

How Much Do Arizona Private Hard Money Lenders Charge?

Private lenders charge different interest amounts ranging from four to 12 percent. The amount they charge will be dependent on several factors, including your investment history, the numbers of the deal at hand, the proposed term length, and more. However, the good news is that oftentimes the interest rates will be negotiable. Remember as you practice your pitch that not only are you trying to secure financing, but also the best loan terms possible.

Summary

When working with private money lenders, your goal should not be to land a deal and move on. Instead, you should seek out someone you can present deals to on a long-term basis. If you focus on building a strong relationship, you can secure financing for your current and future investments.

Always remain professional when building a network, a strong portfolio and a great pitch can go a long way in landing a deal. By making strong connections and maintaining positive relationships with each lender you work with, you can help ensure you always have options when it comes time to finance a deal.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Tel: 623-582-4444
Level4Funding.com

Private Hard Money Lender

Who is this Dude? Dennis brings with him substantial experience in residential real estate. Dennis has extensive experience purchasing, renting, and selling numerous homes over the past 45 years. His first purchase was a property in California when he was 18 years old.   Dennis graduated from California State University Pomona with majors in Computer Science and Business Management. He is a Licensed Mortgage Broker, Licensed Mortgage Originator, Licensed Real Estate Agent, Licensed Insurance Agent Certified Sort Sales Specialist (CSS), Certified Negotiator (CNE), and FAA Licensed Private Pilot.

 

Raising Money For Real Estate Investing In 6 Steps

Raising capital for real estate can be a challenge for many new investors, but it is necessary for anyone looking to succeed in the industry. The key to learning how to raise capital for real estate is to focus on identifying what today’s lenders covet the most (and give it to them). If you succeed, there’s no reason you shouldn’t be able to raise the real estate investment capital you need for your next deal.

Other People’s Money (OPM) is what makes real estate investing possible for a huge percentage of aspiring investors.  Even the most successful real estate professionals and legendary investors almost exclusively use OPM to reduce liability and maximize returns. As you can see, raising capital is critical for investors of every level.

However, both novice and seasoned real estate investors struggle to connect with potential private investors and close the deal. (Or even understanding how capital works with an alternative strategy such as tax lien investing.)

This is a shame, considering there is more real estate investment capital out there than ever before. Remember, private money lenders want to work with you just as much as you want to work with them.  Private lending has never been so attractive or widely accepted, and the benefits for you and your lender are endless.

Raising real estate investment capital is about more than a simple message or conducting a presentation that resonates. It has to be more than a pretty website, thousands of inorganic Facebook friends, glossy folders, and a nice suit.

What Is Investment Capital?

Investment capital is the money used to fund a given investment deal. This can include the costs of acquiring a property, initial renovations, and upfront costs. There are generally two types of investment capital: debt and equity. Debt refers to investment capital from hard money lenders, such as banks, and often requires interest payments. An advantage of using debt investment capital is that hard money lenders will not have a say in the company. However, many investors may find it difficult to secure capital with hard money lenders. This is where equity (and OPM come in).

Equity refers to money secured by selling ownership of a property or business. Private money lenders may invest in a company if they see the investment as potentially profitable. Using equity as a form of investment capital has different pros and cons to utilizing debts, so investors must consider both options. For entrepreneurs ready to put the work in, raising private money can offer the chance to pursue various investment opportunities and expand their portfolios.

What Are Money Partners?

Money partners are anyone you decide to work with to fund a given deal. When it comes to raising capital for real estate, money partners can be beneficial because they can enable investors without significant capital to get started. Depending on the arrangement at hand, money partners can finance a deal, provide advice, and even share a given investment risk. Because of this, money partners are often highly sought after in the investment world. It is important to note, however, that partnering with other investors is mutually beneficial. Business partners stand to benefit from the success of a good deal just as much as you do, something that is important to keep in mind as you get ready to approach potential lenders.

Money partners exist throughout the real estate industry, though it is important to approach each potential investment carefully. It is not uncommon for even the most seasoned real estate investors to fail to close a deal with private money lenders or money partners. To ensure this does not happen to you, research potential investors you are trying to work with and put in the time and effort to ensure you are prepared every step of the way. If you are interested in learning more about how to find private money lenders or money partners, read this guide.

Uses For Private Money

Those who want to raise capital for real estate most commonly use private money for refinancing a property or buying a new property. For example, if you purchased a property using a conventional mortgage but want to want to negotiate for a shorter repayment plan or lower interest rate, you can use a private money lender to help you refinance.

If you are interested in condos, single-family homes, multifamily homes, or apartments, private money can be used to purchase your new investment property. To get a private money loan for a new investment property, you will have to pitch the potential profitability of the property with reliable numbers and predictions. Raising capital for real estate using private money is typically easier for experienced investors as they have records of successful deals they have made.

How To Raise Private Capital For Real Estate

Private money lenders will often have their own set of rules and guidelines. While many will exercise similar practices, the criteria each requires of their borrowers are different. I maintain, however, that there are several universal things private money lenders look for.

If borrowers can identify what it is their money partners want, it is more likely that they will receive the loan. You see, lenders are in the business of making money, too. When it comes to private money lenders, there are 6 P’s that you can remember. If you can give them the things I outline below, you could find yourself with the money needed to buy your next deal:

Protect their capital

Promise realistic returns

Prove your potential

Procure a great deal

Provide your track record

Promote relationship building

1. Protect Their Capital

The primary concern investors have is protecting what they have loaned out. If they lose that, they won’t be able to make a profit – which is the whole point. That is why so many money partners have recently invested in low-yielding real estate-related products and ventures. When contemplating this factor, most look for collateral and how easy it will be to get their money back in the worst-case scenario. So be ready to answer these questions and have a plan B in your back pocket. It should go without saying, but the best way to work with a private money lender and raise the real estate investment capital you need for your next deal is to convince them that it is worth their time.

2. Promise Realistic Returns

Where most real estate investors go wrong when trying to raise capital is promising huge returns. If you sound overconfident, your presentation will automatically appear to be a “high-risk investment” or “scam,” which is certainly not the message you want to send.  You will have to be above average market rates – of course – but do not project too high.  The last thing you want to do is overpromise and under-deliver.  Even if you think your goals are possible to achieve, start by underestimating and then deliver more later, which will create a sense of loyalty and reliability between you and your first line of money partners. If you tell them, they will receive an ROI of 8 percent, and they make 14 percent after all is said and done, you can bet they’ll put you at the front of the line in their contact database and beg you to take their money for your next deal.

3. Prove Your Potential

On the other hand, you need to make your investment sound appealing.  Savvy investors with bigger pockets and heavy-weight venture capital firms are, of course, turned on by the promise of big wins. So while keeping projections conservative, don’t be afraid to hint at the full upside potential – those big numbers you are hoping you’ll really hit.

4. Procure A Great Deal

Everyone wants a “deal.” There are two reasons for this. The first is that it is simply human nature. If someone thinks they are getting a good deal on a product, it automatically gives the impression of value.  The second is that these individuals and money managers want to look smart and feel like they are making a sound investment. They all have someone they need to impress. It could be their boss, their co-worker, their spouse, a competitor, or even themselves.  Regardless of who, your potential money partner will want to be able to boast about how intelligent they were to discover this high-yielding or trendy investment before everyone else. Help them out.

5. Provide Your Track Record

Of course, most investors expect to see a proven track record. They want to know that you can deliver on your plans. If you do not have direct experience in real estate investing, what other relevant experience do you have or who else can you partner with?  Have your portfolio ready to go with your successes on top.  You have got to have the numbers to prove yourself.

6. Promote Relationship Building

Surprisingly – or perhaps not so surprising – having a personal relationship between both investing parties trumps the rest of the qualifications.  So how can you build more authentic relationships or find like-minded individuals – whom you might already know – that might want to work with you? This is one of the most important habits to acquire as a real estate investor. Try attending a local networking event to get your face out there.  If you want to discover a potential money partner and achieve success, building and maintaining relationships is necessary.

5 Tips For Raising Private Hard Money Real Estate Capital

The best advice for raising private hard money capital in real estate will vary depending on who you ask. The reason for this is that over time investors find the way of doing things that work best for their real estate businesses. However, this is not helpful to newbies. What I can say is that it takes time to develop a surefire system for raising private capital. In the meantime, —here are some tips to help you get started:

Use Your Own Money First: Before you start fundraising a new project, assess how much capital of your own you can rely on. Not only will this help you frame the budget for the project, but it will also lower the amount of cash you are paying interest on should you find a private lender. To increase your personal capital, consider redoing your monthly budget and reducing expenses for a while; you may even be eligible for a home equity loan.

Attention To Detail: The details included in your portfolio are going to make or break your pitch to private money lenders. Ensure you have an accurate purchase price, property value, rehab cost, and rental value wherever it applies to you. If this is your first investment deal, make sure the figures and estimates in your deal analyzer are as accurate as possible. Strong attention to detail could mean the difference between choosing a potential investment and securing enough financing.

Showcase Your Success: When you complete a successful real estate deal, don’t be modest! Share the good news with your network, website, and social media following. Investors can and should showcase their successes (or wins) as they come along. When done right, this can help establish your credibility over time in the real estate industry.

Build Relationships: Networking is not as simple as exchanging business cards, and you shouldn’t want it to be. If you want to have a successful career in real estate, it is critical to building relationships across the industry. Keep up with your connections, celebrate their successes, and check in from time to time. Building genuine relationships will help your career more than you can imagine.

Educate Others: Sometimes, you may encounter potential lenders who are mostly unaware of the intricacies of a real estate deal or the dynamics of private lending. That is okay; it could be the perfect opportunity to educate someone else about what you do. As you build relationships with other real estate professionals, have conversations about lending and acquiring deals, share the resources you find helpful, and put people in contact with one another when fitting. This will help you build relationships (as I mentioned above) and potentially introduce investors to a mutually beneficial real estate aspect.

Best Books For Learning How To Raise Capital For Real Estate

Raising capital for real estate has become one of the most discussed topics associated with real estate investing. If for nothing else, it is the one concept anyone could stand to improve on, there’s never too much funding. As a result, there are volumes written about raising capital for real estate, and perhaps even more knowledgeable people talking about their own strategies just about anywhere someone is willing to listen. Truth be told, it is not hard to find someone willing to offer their own opinion on raising capital for real estate investments; the hard part comes in distinguishing between those who are truly knowledgeable and those who are, for lack of a better word, ignorant.

It should go without saying, but incorrect information can be damaging to one’s career. Therefore, it is important to gather information from trusted sources, not the least of which include:

Books: To this day, books represent one of the greatest ways to filter through the volumes of information made available to investors. However, the number of books one can find on raising capital for real estate can be staggering. Instead of sifting through everything, and risking learning from someone that may not know what they are talking about, save yourself some time and consult “The Real Estate Wholesaling Bible,” by my friend and business partner Than Merrill. As the name suggests, aspiring investors will learn how to wholesale real estate, but a large portion of the book deals with raising capital and funding. As a compliment, my own book, “The Real Estate Rehab Investing Bible,” will teach readers the importance of raising capital for real estate and the best ways of going about doing so.

Podcasts: Relatively new to their written counterparts, podcasts are not to be underestimated. Oftentimes free, these downloadable audio files are filled with information from today’s top minds in the real estate industry. Get Wealthfit, for example, is a compilation of podcasts by investors who have been exactly where many aspiring investors hope to be one day. Get Wealthfit covers everything from money management to marketing strategies and everything in between.

Summary

Raising capital for real estate does not need to be nearly as hard as many make it out to be. For those learning how to raise capital for real estate, remember, working with money partners is as simple as doing two things: learning what it is they want the most and giving it to them. The investors can identify what today’s lenders are looking for that stand the best chance at getting the money they need for their next deal. That said, pay special considerations to the steps above, as they offer insight into what most today’s lenders look for in a borrower. Only when you can give a lender what they want will your chances of receiving real estate investment capital increase dramatically.

Is a lack of funds keeping you from investing in real estate? Do not let it!

One of the obstacles many new investors face is finding funding for their real estate deals. Our new online real estate class, hosted by expert investor Than Merrill, is designed to help you get started learning about the many financing options available for investors, as well as today's most profitable real estate investing strategies.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Tel: 623-582-4444
Level4Funding.com

Private Hard Money Lender

Who is this Dude? Dennis brings with him substantial experience in residential real estate. Dennis has extensive experience purchasing, renting, and selling numerous homes over the past 45 years. His first purchase was a property in California when he was 18 years old.   Dennis graduated from California State University Pomona with majors in Computer Science and Business Management. He is a Licensed Mortgage Broker, Licensed Mortgage Originator, Licensed Real Estate Agent, Licensed Insurance Agent Certified Sort Sales Specialist (CSS), Certified Negotiator (CNE), and FAA Licensed Private Pilot.