One of the best ways you can profit handsomely from real estate investing is to set up private money partnerships.

As I’ve said before, you should always look at two sides of the private money coin: lenders and equity investors.

If you only think in terms of private lenders, you’ll be limiting yourself to only those people who want to loan money secured by real estate for a fixed return. I guess that’s not bad, right?

Wrong!

Doing this will severely limit the amount of private money you can get.

Hear me out on this: there’s a whole big world of people with money out there. Real big. In fact, it would downright shock you if you knew how many people would invest money with you – if only you went about it the right way.

And…a big thing you should know is that there are a lot of people with money who want more than a secured, fixed rate of return. They want a “piece of the action.” They want to share in the profits and cash flows of a deal. They want the thrill of potentially making lots and lots of moolah. So, with this being the case what do most real estate investors do?

They continue to offer only secured private mortgage loans!

This is a certain path to mediocrity and not hitting your money-raising goals. Why? because you aren’t giving people what they want!

Let me repeat a piece of advice that took me a long time and a lot of beating my head against the wall to figure out: getting private money is a marketing process, not a financing process. You have present an opportunity that is so irresistible that people cannot help but fall over themselves to write you a check. And, to do this means that you have to….

Give people what they want!

And some people will want a piece of the action.

Don’t believe me? Ok, here’s what a recent deal of mine looked like:

Newer build SFH (single family house)
2,000 sq. ft
Bank Owned
Buy price: $85k
Rehab: $25k
Private Investor funds: $115k (purchase + rehab + $5k holding costs)
After-repair value: $160k
Estimated Profit (after selling costs): $40k
Holding time: 90 days
Investor split: $20k
Investor ROI: 17.3% on this deal – equates to annualized return of 69%
My company ROI: = infinity

Are you wondering why I would give up so much of the profit on a deal? I mean, why wouldn’t I just get a secured lender at 10% annualized interest rate and

The answer to this is EASY!

You see, with the current real estate market and the available opportunities, I can have my cake and eat it too!

I don’t need to ‘ration’ my private investors. I will do any and every deal that makes sense. Why not just do 2 deals instead of 1? When it comes to real estate investing and private money, it’s not always 1+1 = 2. Sometimes, it’s 1+1 = 4.

Brining in as much private money as makes sense will also benefit my business long term. I know for a fact that the investors that funded the above deal in the example have more money to invest. If I can get their money out so that it makes sense, then why not do it? They’ll just invest more for other (bigger) deals and then refer family and friends. Also, a $20k profit isn’t anything to sneeze at. It’s not what I consider a “home-run” but it’s not a throw-away either.

But where is all this money you’re talking about?

You know, speaking of that, something weird just happened to me the other day. I found out my neighbor is sitting on a pile of money. I don’t know if they are a millionaire or not, but it turns out that this person has lived very frugally and invested fairly wisely over the past 30 years or so. Their house is paid off, no car loans. They definitely have $50k or $100k they could throw at one of my deals.

I encourage you to read The Millionaire Next Door by Thomas Stanley and William Danko. It will really open your eyes.

Even though the national economy is down right now, there are still more millionaires today then there were 5 years ago. And, there were definitely more millionaires 5 years ago then the 5 years before that.

If you open your eyes, and kick your marketing up a notch, you’ll see that there are plenty of available funds for you to tap into.

Think bigger and think more about giving people options to share in your profit and cash flow upside. You will attract far more investors that way.

Give ‘em what they want!

-Happy Investing