Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

4 Industry Secrets For Finding Private Money

Written by Than Merrill

We are conditioned to be afraid of rejection. This explains why many people find it difficult to negotiate the best possible deal or ask others for help. This fear of rejection is also a big reason why many new investors struggle at the onset of their career. They are afraid to make offers or grow their business with the people closest to them. Instead of asking friends and family for cash to fund deals, they simply do nothing and wait for funds to fall into their lap. However, once they obtain private money, everything with their business changes. Fortunately, getting this money is often much easier than they anticipated. You just need to know how to go about finding private money.

There are many people outside of the real estate business looking for a way in. They have some money to invest, but not the time or education to fully commit. This is where you can bridge a gap and have the best of both worlds. You can handle the real estate side while your partner supplies the cash. Of course it is not always as easy as this, but it not as difficult as others make it out to be either. If you reach out to 50 contacts, odds are you will find a handful of people who are eager and interested in working with you. Finding private money can be made a whole lot easier by following a four step process:

Hand drawing money and house sign

1. Know what you want: If you are asking for tens of thousands of dollars, you had better know what you are talking about. This starts with an education on exactly what you are going to use the money for. You need to know what kinds of deals and properties you plan on targeting. You should have an idea on the returns and percentages involved. A private money lender may be close to you, but they will still be driven by the returns. Before you ask to meet with anyone, you should take the time and know exactly what you are talking about. If you don’t know what to ask for, it will be difficult for anyone to give you money.

2. Put yourself out there: This is where your fear of rejection has to be dealt with. Before you ask anyone, you need to know that a large majority will so “no” and ask what you are doing. This is a part of asking for money, and has to be dealt with. Instead of looking at the rejection, think about it a different way. Only a handful of fortunate people will accept your offer and want to work with you. The ones that do get back to you have an honest interest in the real estate business. They may have been waiting for the right time or the right partner to get started in the business. Whatever the case is, they probably want to work with you more than you want to work with them. There is rejection in almost every area of the real estate business. The quicker you get thick skin, the better off you will be.

3. Have a plan of action: The biggest hold up with asking for money is with how to do it. The simplest way around this is by taking a direct approach. Write up a letter, email or message stating that you are starting out in the real estate business and looking for financial backing. Briefly explain how you will go about it without leaving something to talk about when you meet. Don’t get too involved in numbers or specific deals in your initial contact. Start by sending an email to as many people as you feel would be interested. If you haven’t reached out to them in a while – or  ever – they may think this is spam. Send a message on FB or any other social media forum you. Additionally, you should send an old fashion letter in the mail as well. The more options you give yourself to connect, the higher chance your message will be read. If your response is low, send another round of communication. You will have to deal with a few calls and emails, but all it takes is one interested party to make a connection.

4. Be ready to meet: Your initial message should be a precursor to an actual meeting. You need to treat this meeting like you would with a lender or anyone you are seeking money from. Be ready to take on questions about expectations, deals, percentages and time frames. You should be able to clearly explain and define what your role in the deal will be. You need to have a plan for how you will find deals and how they will be structured. Private money can come from family, friends and even current co-workers.

Finding money can be the thing that completely changes the way you invest. Access to cash allows you to make offers on properties that you may not have previously had any chance of getting accepted. It can help you close more deals a year and meet more people. This will improve your network and your pipeline. Private money is all around us if you are willing to ask for it.