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.

Different Types Of Home Loans For Buyers And Investors

 One of the biggest mistakes, potential homebuyers can make is assuming that they cannot qualify for a mortgage. There are numerous unconventional home loans available to make buying property possible for more consumers. Even without the perfect credit or the money for a large down payment, you may qualify for these loans. Read on to find out what constitutes a non-conventional loan, how to qualify, and pro tips on how to proceed if you want to buy a home with a non-conforming loan.

What Is An Unconventional Loan?

A non-conventional loan, or mortgage, is a type of loan that does not have to follow traditional mortgage loan requirements. Non-conventional loans sometimes refer to non-conforming loans. Conventional (or conforming) loans use wide sets of qualifications and eligibility, such as credit scores, loan amounts, and debt-to-income ratios. Also, most conventional loans require a 20 percent down payment minimum or private mortgage insurance payments.

Non-conventional home loans offer more flexible qualification requirements, oftentimes because the government has backed them. The Federal Housing Administration, the U.S. Department of Veterans Affairs and the U.S. Department of Agriculture are all federal agencies that ensure these non-conventional loans to encourage homeownership.

Conventional Vs. Unconventional Loans

One of the main differences between conventional and unconventional loans is the credit score, and down payment they require. Private Hard Money lenders offer conventional loans and require buyers to have an excellent credit score.

Conventional loans are either fixed-rate or adjustable. Fixed-rate mortgages’ interest rates will not change. Adjustable-rate mortgages often begin with a lower interest rate and lower monthly payments. However, a change in property taxes or your homeowners’ premium results in an increased interest rate.

Government programs back unconventional loans and have lower credit score requirements and larger down payment. However, the loan limits of unconventional loans are also lower.

The two main types of government-backed unconventional home loans include FHA and VA loans. The government ensures FHA loans allowing for lower requirements to obtain these loans. Veterans Affairs Loans (VA) are reserved for military members and their families. These loans may allow for no down payment, but ultimately the VA will handle the approval process.

Types Of Unconventional Loans

Depending on how long you have been in the real estate industry, you have likely heard of various non-conventional loans. These loans have atypical approval requirements. Read through the list below to familiarize yourself with the various types of nonconforming loans available:

·         FHA: Loans secured by the Federal Housing Administration is one of the most popular non-conforming loan types. This is because of the low-down-payment requirements. Moderate-income homebuyers can benefit from these loans, but they include some credit score guidelines. The application process of FHA loans is universally accessible because most mortgage providers issue them.

·         USDA: The U.S. Department of Agriculture backs USDA loans with the intention to develop rural areas. Loan applicants must be looking at property in a town with less than 20,000 inhabitants to be eligible. Other requirements include a stable income and a credit score of at least 640. Also, the property must be the borrower’s primary residence.

·         VA: Active-duty military personnel and certain veteran groups can apply for a VA loan through the U.S. Department of Veterans Affairs. One of the biggest benefits of this loan type is that they do not require a down payment. Read this article to learn more about VA loans and how to apply.

·         Crowdfunding: Crowdfunding is arguably one of the most interesting developments to come from new technologies in the real estate industry. The process refers to raising money for a property from groups of people rather than a single loan. The breakdown of homeownership will vary depending on the stipulations established at the time of fundraising; however, this is an interesting option for investors and even first-time homebuyers to consider.

·         Seller Financing: This arrangement involves loaning the money for a property directly from the previous owner, who is selling the home. This non-conventional setup is attractive because it can allow homebuyers to bypass strict mortgage requirements. However, it is often in exchange for higher interest payments. Often, the properties do not advertise seller financing, so do not be afraid to ask. Make sure you have a concrete pitch when you do.

·         Private & Hard Money Lenders: Private and hard money are two of the most common sources of financing among today’s real estate investors. This route involves finding an investor to act as a lender and finance a property; as the buyer, you would pay back the loan with interest directly to the lender. Again, this nonconforming financing method is a great way to work around potentially stricter mortgage approval requirements.

How To Qualify For An Unconventional Mortgage Loan

Non-conventional home loans facilitate homeownership opportunities for individuals who may not qualify otherwise. You will find easier requirements with these loans than their conventional counterparts. Down payment requirements for non-conventional mortgages can be as low as three percent, while acceptable credit scores in the 500’s.

It is important to note that the specifics of non-conventional mortgages will vary from type to type. Keep in mind that not everyone will qualify for every type. Some non-conventional loans include demographic limits, such as eligible military veterans and their families or low-income homebuyers in rural areas.

As mentioned earlier, loan products that do not conform to conventional loans’ requirements are considered non-conventional mortgages as well, even if the federal government does not back them. According to NerdWallet.com, nearly half of home loans are now provided by alternative mortgage lenders. This shows that the demand for non-conventional home loans is significant and growing.

Investors hoping to secure non-conventional home loans can rely on the performance of other properties when raising funding. Depending on the loan’s source, investors can present numbers from past real estate transactions to establish rapport with lenders. Different non-conventional loan types will fit into three main sources: online lenders, marketplaces and brokers, or non-bank lenders. Investors should frame their approach depending on the source of the potential loan.

Online Mortgage Lenders

Chances are, you have seen at least one commercial for Rocket Mortgage on the television. Quicken Loans launched Rocket Mortgage – one of the most substantial companies in a new generation of online mortgage lenders. Online lenders are offering consumers mortgage and refinancing approvals in a matter of minutes, using loan-decision algorithms. These unconventional mortgage programs appeal widely to millennials, today’s largest group of homebuyers, who prefer to shop for products online and receive instant gratification.

Marketplaces And Brokers

Like the concept of online mortgage lenders, many popular sites such as Zillow or LendingTree offers consumers a list of potential loan products to choose from. An algorithm performs a search that takes the shopper’s basic information and matches nonconforming mortgage rates and products that lenders offer. The consumer then selects their preferred product and works directly with the lender to finish processing the application. In turn, these marketplaces, and brokers, which can be thought of as middlemen, receive a fee for providing lenders with leads.

Non-Bank Lenders

Small lenders and credit unions provide an alternative to home buyers who have less-than-perfect credit. Because these entities often do not face as many federal regulations as their counterparts, the banks can provide more flexible options to consumers. As a result of the housing crisis, many big banks have decreased their roles in mortgage lending, limiting their products to the most qualified borrowers. In recent years, non-bank lenders have increasingly filled this void.

How To Buy A Home With An Unconventional Loan

It is easy to get discouraged when you want to buy a home but cannot see the light at the end of the tunnel when paying off debt or saving up enough funds for a down payment. However, it should be known that non-conventional mortgage loans have become increasingly popular, making homeownership more accessible to those who cannot or do not want to take out a conventional mortgage. Follow the steps below if you are interested in buying a property with a non-conforming loan:

1.      Compare online mortgage lenders: Online lenders tend to offer flexible product options, compared to their brick-and-mortar counterparts. Spend time comparing online mortgage lenders that provide loans for lower credit scores or require a lower down payment. It should be noted that interest rates will often be higher, and shoppers should mind their due diligence and perform thorough research before deciding.

2.      Meet with a credit union: Credit unions are oft-forgotten by borrowers. Still, they are institutions that often offer great deals when compared to traditional banks, especially if you are a long-time member. Sit down with a representative with your credit union and go over their lending programs, including first-time home-buying programs, and you may be able to obtain great terms.

3.      Identify an alternative solution: New home buyers should not automatically write off traditional lenders and should always sit down for a meeting at the very least. In some cases, a lender may be willing to work with home buyers to develop a creative solution, such as offering to combine a graduates’ student debt with their mortgage payment or increasing the loan-to-value ratio on the loan. For more alternative solutions, review the non-conforming loan types listed above.

 

Summary

Today’s economic landscape can make maintaining perfect credit and saving up 20 percent for a down payment a challenge for many aspiring homeowners. The burden of student loans, skyrocketing costs of living, and ever-increasing property values can make the goal of homeownership seem even farther away. However, by considering unconventional home loans, buyers will have access to more flexible, creative options. These unique financing methods have enabled countless individuals to achieve their goals of homeownership.

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 Get a Construction Loan for Your Investment Property

Because there are so many financing options available to today’s homebuyers and real estate investors, it can be hard to make the right choice. When it comes to upgrading your property or building a new one, one option worth considering is a construction loan for investment property

Renovation or construction loans for investment properties can be used for several projects but almost always allow the user to customize their space or property. Anyone interested in new construction or a big renovation should investigate this as a viable financing option. Keep reading to learn if these loans are right for you, and learn how you can qualify.

What Are Construction Loans?

Construction loans are short-term financing options for new real estate or renovation projects. They are used to pay for the costs of building a new house or upgrading an existing property. Construction loans are only applicable for the time it takes to complete the project, and users only borrow what they need. These loans are distributed directly to the contractor (instead of the borrower) in segments called “draws.” Draws are marked as certain elements of the project are completed, such as the foundation being poured, or the frame being built.

The main appeal of construction loans is that they enable home buyers or investors to build a new property; though, the freedom to customize a property does come at a cost. For example, construction loans are known to have higher than average interest rates. The structure is typically set up to protect lenders who trust that a project will be completed correctly and that it will be worth a certain amount when done. However, homeowners should not rule this option out because there are several perks to this form of financing.

Construction Loan FAQs

Construction loans may seem self-explanatory, but investors who are inexperienced with using this type of loan may have questions about what they are and how they can use them. Look at some of the most frequently asked questions about construction loans, before you decide if obtaining one, would be right for your next investment project.

What Can A Construction Loan Be Used For?

A construction loan can be used for several projects, depending on your hard money lenders’ requirements and terms of the agreement. Here are a few of the ways to utilize an investment property construction loan:

·         Purchasing raw land

·         Pouring foundation

·         Building an addition to a property

·         Framing and finishing a house

·         Building sheds or other structures

·         Adding a garage

What’s The Difference Between A Construction Loan And A Home Loan?

A construction loan and a home loan are different in terms of what they can be used for, and as such, the approval requirements will be slightly different for each. A construction loan is used to build new structures or renovate existing ones, while a home loan is just a traditional mortgage. Both types of financing will require a credit check and other financial information, but a construction loan will also require the project plans to be approved before the loan is issued.

Additionally, construction loans can only be used for the duration of the project. On the other hand, home loans are issued for a set period until they are paid off. Borrowers who rely on construction loans will typically refinance their property after the project is completed and enter a more traditional loan. To do so, homeowners will go through a property inspection and appraisal.

What’s The Difference Between A Construction Loan And A Renovation Loan?

The difference between construction loans and renovation loans lies in the type of project. Construction loans are used for new properties with definitive project plans. Those who use construction loans will also typically transition into a regular mortgage at the end of the construction project. In contrast, renovation loans for investors are used to purchase fixer-uppers or to renovate existing properties. These loans can be used for cosmetic and structural fixes, like insulating a house or upgrading a kitchen.

Can You Get a Construction Loan For An Investment Property?

Yes. You can get a construction loan for an investment property as long as your project plans and finances meet designated hard money lender requirements. Unlike some home loans, there is no process stating that a construction loan must be applied to a primary residence. Construction loans can be a great option for financing an investment property for many reasons. Most notably, real estate investors likely have experience working with contractors and supervising renovation projects already. Therefore, they may be well suited to oversee the construction of a new property.

There are also renovation loans for an investment property obtained by following a similar approval process. Investors interested in a renovation construction loan will find that the loan is distributed based on the after-repair value of the property in question. This is where your investor tool kit will come in handy. Rely on a good rental property calculator and contractor when determining whether or not a renovation loan is the right move for a specific project.

How Can I Qualify For A Construction Loan?

To qualify for a construction loan, borrowers must meet several financial requirements in addition to having their project plans approved. To begin, Hard Money Lenders will typically review your debt-to-income ratio and credit. While the specific requirements vary based on your lender, many ask for a credit score of 650 or more. Borrowers must also have a down payment when setting up a construction loan, which should usually be between 20 and 30 percent. Make sure you shop around when searching for a  private hard money lender; there are numerous options available for obtaining a construction loan, and each will come with different requirements.

To get the final approval for a construction or renovation loan, you must also submit the project’s construction plans. Hard Money Lender will want to see detailed plans for the property and a team of qualified builders attached to the project. It is important to know that while you do need finished plans for the final loan approval, you can get preapproved for a construction loan before buying a property.

Best Type Of Loan For Investment Properties

Three construction loan types are best for investment properties: fix and flip loans, purchase and rehab loans, and construction/purchase and build loans. Typically, investment construction loans are reimbursement loans. In this case, the lender will pay for each stage of construction as it is completed and signed off by inspectors. Let us take a look at the best types of loans for constructing investment properties:

·         Fix & Flip Loans: These loans are ideal for the opportunist who has experience in buying, fixing, and reselling properties within a short period. You will find that most conventional hard money lender and banks will have no problem financing these projects if you comply with common sense hard money underwriting guidelines. What will matter the most for this loan is your experience in effectively flipping properties for-profit and the viability of the project in question.

·         Purchase & Rehab Loans: These loans are best for purchasing old or outdated properties and either demolishing them to construct a new one or completely remodeling it to fit today’s standards. Again, the underwriting will be the most important thing to get this project started.

·         Construction Loans/Purchase & Build Loans: These types of loans are available in the purchase of a lot or for construction on an existing lot you own. Construction loans and purchase and build loans are specifically for non-owner-occupied properties with the intent of retail or future rental income.

Summary

The idea of customizing a property from start to finish may seem impossible, both for homeowners and investors. However, this is not the case. With financing options like a construction loan for investment properties, building a new property does not have to be a distant dream. While there are approval requirements for this form of financing, it can open new doors to anyone interested in purchasing raw land or fixer-uppers. Consider a construction or renovation loan from a Private Hard Money Lender when you plan a project; it might lead to amazing results.

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 Grow Your Real Estate Business Using Private Money

 Have you ever wondered how to grow your real estate business in the most efficient way possible? Are you confident you have considered every avenue to do so? At the very least, there are countless ways to expand your own company, but I digress. Learning how to grow your real estate business may be easier than you think. Better yet, doing so may have less to do with what you know, and more to do with who you know.

Real estate is a people business; it always has been and always will be. As such, you could argue that the relationships you develop over the course of your career are far and away from the most valuable assets you must learn how to grow your real estate business. Everyone forms the contractors you work with to the lawyers that help you draft critical documents has their place, and it is probably a valuable one at that. It is worth noting, however, that there is one relationship you might want to consider prioritizing over all others: the one you share with your private money lenders. If for nothing else, private money lenders not only serve as your access to capital but also a great means of financing business growth. It is entirely possible to grow your real estate business with their help, and it is about time more investors realized that.

How To Grow Your Real Estate Business With Private Money

Make no mistake about it, private money lenders are investors looking to make profits off somebody else. However, their cooperation with real estate investors has essentially changed today’s financial landscape. A private money lender is an investor who makes loans secured by real estate. While they may serve the same purpose as a traditional lending institution – think government loans and big banks – there are several key differences: private money lenders typically charge higher rates than banks but will also make loans that the average bank would usually pass on. It is important to note the difference between the two. While banks and similar lenders may offer the most attractive rates, they do not provide the same combination of speed and transparency in the decision-making process. For these reasons alone, private money is essential to growing your real estate business.

The average real estate investor relies on a steady flow of private money to supplement their respective deals.  Not only are institutional loans lengthy and cumbersome, but they can also impede the progress of a residential redeveloper.  Conversely, private money can afford investors the ability to grow their business at a steady pace.

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.

A Guide For Private Money Lenders How To Attract Investors

While each individual investor may have their own agenda when it comes to a particular exit strategy, the returns provided by an investment are of the utmost importance. For all intents and purposes, the ROI is the motivation behind any investor. After all, money means security. Who would not want to maximize their ROI? Having said that, private lending is perhaps one of the best ways to increase returns. Private mortgage lending has typically provided an annual return of 8-10%, based on the historical interest rates charged to borrowers.

The Pros of Private Lending

Assuming you have decided to pursue becoming a private money lender, it is important to familiarize yourself with the benefits it provides borrowers. However, it is equally important to know the drawbacks as well. As with any new business venture, you will face both positive and negative circumstances. The decision of whether to proceed with this moneymaking strategy lies in the balance. Do the pros outweigh the cons for you? The following illustrates some of the biggest pros involved in private investing:

The Pros:

• Reliable Cash Flow: While there are no guarantees, private money lenders can typically expect an annual return somewhere between 8% and 10%. Depending on the loan structure, there may be other ways in which profits are realized, like interest.
• Capital Preservation: In loaning your own money, your investment will be secured by a first position “priority” lean on the property in question. Additionally, the loan-to-value (LTV) ratios are typically 60-70%, allowing the invested capital to be preserved in the event of foreclosure. Structured correctly, and your investments are very safe.
• Diversification: As an Arizona private money lender, you are encouraged to diversify your portfolio.
• Minimal Volatility: Loans are typically short in their length (usually not more than 12 months).
• Passive: Private money lenders earn relatively passive income, in that their money is working on their behalf. The return on investment is not correlated to the amount of time they put in.

Private Lenders: The First 3 Steps To Get Started

Whether you are interested in having your money work for you now or in the future, understanding what it takes to get started is a critical step. Having said that, it is imperative to equip yourself with the right tools should you decide to become a private money lender. Before you make the transition from the borrower to a lender, be sure to familiarize yourself with the following:

Make Sure You Qualify: Prior to becoming a private money lender, you must become seasoned. Essentially, you should be actively investing and using the systems that are offered to you. Moreover, if you have already rehabbed, wholesale, or turned profits with some relative degree of success; then there is a good chance you are ready to make money with the money you have already accumulated. You really cannot know where you are going until you are familiar with where you have been. Provided you meet the qualifications, you will also need to make sure that you can afford to become a private money lender. In other words; can you manage your monthly expenses while simultaneously working as a private money lender? If your answer is yes, becoming a private money lender may be right up your alley.

Pick An Angle: As a private money lender, there are multiple routes to consider. However, your choices will be entirely dependent on the amount of funding you have available, how long you want your money tied up, and the time you must dedicate to a particular opportunity. In order to better understand the directions, you can take, consider the following criteria:

• Residential vs. Commercial
• Short Term vs. Long Term
• Direct vs. Passive 

Each of these options will become available to you as a private money lender. It is up to you to choose the path you want to take.

Speak With A Professional:

Those set on becoming a private money lender should seek council with a professional that has already done it. Moreover, speaking with someone that has already done what you want to do can lead to some valuable insight. However, if you choose to lend directly, you should speak with your personal team of professionals. This includes your Escrow Company, Title Company, attorney, and anyone else who may be of concern.

It is an even better idea to speak with a team of people who have been private lending for a while. While you may want to try direct lending, finding a private lending company with a good track record is an exceptionally good place to start. Remember, investing with a pool of people is one of the safest ways to go.

If you have had success attracting private lenders, share your advice below:

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.