We use the How To Hire A Private Money Coordinator to hire our private money coordinator. A private money coordinator will be responsible for raising all the private money you need to fund your deals as a real estate investor. It is their full time, commission based job to go out and raise money for deals for your business and that is their sole focus.
You will want to create your private money program first or have that be the first step for the private money coordinator you hire.
I recommend that you provide potential private money coordinators with written documentation of your program, what you would expect from them, ways other investors and private money coordinators have gone about raising private money, sample elevator speeches and so on. They should read through this material and get questioned on it with you before you sign an independent contractor agreement with them so that they fully understand what they are going to be doing.
I also insist that our private money coordinators call their local state securities office to find out what licensing, if any, and what they need to do to be in compliance when raising private money for us.
Until my next post,
James
P.S. Raising private money is an extremely popular topic right now in the real estate investing community. We have checklists, independent contractor agreements, sample private money programs and so on for our Real Estate Investor Bronze Members in the Real Estate Investor Wiki.
Today I end the series of articles that I have been sharing with you regarding ourprivate lending FAQs. Over the last several weeks I shared with you all of the FAQs that I typically answer and how I answer them.
For our Real Estate Investor Bronze Members, you can also see some of the resources that we have on the Real Estate Investor Wiki relating to:
- Private Money
- Private Money Presentation
- Raising Private Money
- And much, much more…
The last question that I usually answer is how to get started as a private lender with us. For this question, I usually give potential private lenders my contact info and I schedule a time to meet with them (or talk to them on the phone if meeting is not practical).
So, that’s it. I hope you enjoyed the series and, better yet, I hope you implement your own system so you can raise private money for your own deals.
Until my next post,
James
I am a huge advocate of spending part of your marketing time each day marketing to find new Private Money Lenders (links to exclusive resources for our Real Estate Investor Bronze Members) that are willing to work with you in a win-win relationship to help you purchase more investment properties and for them to get a safe, secure, fair return on their money. Protecting your private money lenders with, what I refer to as, reasonable ratios of the loans they make in comparison to the current fair market value of the property is critical to your long term success as a real estate investor.
So, what does it mean when I say reasonable loan to values?
Well, for all but a few rare exceptions, I am recommending that you do not exceed 80% loan to actual, current fair market value.
Does that mean you can’t do no money down deals with private money lenders? Absolutely not. You should be buying properties that are less than 80% of value. You can ask them to fund 100% of the purchase as long as the loan they are making is less than 80% of the actual market value of the property.
This is not the time to be cute and use an artificial value. This is not what the property was worth a year ago before the market dropped 10% (or more). This is not your wishful… I hope it will sell for this in a year from now. It is not the rent to own price that includes some speculative appreciation. I am saying it is the price that you could sell the property for within 3 months of having a real estate agent sell it for you. That’s the number to use. And, in slow markets, it may be lower than you think to get it sold in 3 months.
So, for a long successful career investing in real estate with the help of private money lenders, I recommend you keep their loan to values at very conservative levels.
Until my next post,
James
Just in case you’ve been asleep for the last year: don’t take out variable rate loans on your investment properties!
Come on folks, if you have taken any time to look at what interest rates have been doing over the last forty years, you will notice that the rates we are seeing right now are near all time lows.
If there were a perfect time for locking in a fixed rate loan, when would that be? The answer is this: when rates are at or near their all time lows.
If there were a time for taking a chance on a variable rate loan, when would that be? The answer is, when rates are high and likely to come down AND when variable rates are lower than fixed rates.
If you look at what money is being offered at today, you will see that interest rates are at or near all time lows. Can interest rates go much lower than what we are seeing now? Not likely. So wouldn’t now be a good time to borrow money at fixed rates?
You will also see that fixed interest rates are very competitive with variable rates. Often the attraction of variable rate financing is the teaser rate that is so much lower than what a fixed rate would be.
These teaser rates tempt you with 3 years at rates that are less than a fixed rate loan. If you only intend to be in the property for three years or less it looks very appealing.
Don’t be fooled!
If the recent crisis has taught us anything, it’s that the future is uncertain and you might be holding your properties far longer than the 3 years you originally anticipated. Better to have good fixed rate financing locked in when it is available–and available at a great rate–than to lose the option completely when markets and lending practices change.
My message to you: when in doubt, get fixed rate financing over variable rate financing… ALWAYS!
Until my next post,
James
P.S. Financing your investment properties is something that new investors tend to spend a lot of time learning. With our Real Estate Investor Bronze Membership we teach, via over 100 real estate course downloads you get plus on-going training and consulting, how to do traditional financing with banks and mortgage brokers, owner financing strategies (and yes there is a huge number of them out there if you know how) as well as strategies for using private lenders. Sign up for our Real Estate Investor Bronze Membership to tap into our resources, training and consulting now and take your real estate investing business to the next level.
Yesterday I met a friend and fellow business owner for lunch and we were discussing some solutions for businesses that, from time to time, might run into a small cash flow crunch. In our current lending economy, where can a small business owner go to get a temporary loan?
Well, Peer To Peer Lending might be a possible solution. Peer To Peer Lending or private lending is the process of borrowing money form an individual or small business instead of from the bank.
There are several websites that offer a place for people looking to lend money and get a nice return to go and find folks that would like to borrow and are willing to pay a fair amount for access to that money. Each website’s service, from what I glanced at, seems a bit different so be sure to read what each offers and how it works carefully.
Rates can vary based on your credit-worthiness, the duration of the loan and a variety of other factors.
While I have not personally ever used Peer To Peer Lending, it might also be a possibility for some real estate investors to use it as a source of hard money lenders or private lenders on properties. If anyone has used it for that, please do leave a comment below.
So, if you ever find yourself in a situation where you need to seek out alternative sources of money you might want to consider checking out some Peer To Peer Lending websites.
Until my next post,
James
P.S. I did add some Peer To Peer Lending sites and a brief entry about it to the Business Wiki for our Business Bronze Members.
