It’s very common for real estate investors to start out on a part-time basis. It usually goes something like this:

You’re working a full time job or running another business and you recognize the great wealth building opportunity that real estate investing brings. You begin looking at properties, making offers and a getting feel for how the business works. You soon recognize that financing your investment properties is a big part of the equation. Mortgages and hard money are very difficult to come by (and the terms are unfavorable). You realize private money is the best option for buying and selling, as well other entry/exit strategies (1031, etc.).

A problem arises in your mind, though: “will it be a negative factor for a private investor to place funds with me since I do not yet dedicate all of my time to real estate investing?” After all, you think, “won’t the investor see a problem that their investment project with me can’t take full priority over my job or other company?“

These are good and valid questions. You are on the right track when you think along these lines because you are putting yourself in the private investor’s shoes. It would be cause for worry if you didn’t think this way a little bit. But, fear not..

Part time real estate investors can get private money just as easily as full-time real estate investors. As long as you set up the deal the right way, there’s nothing stopping you from giving the private investor and their investment with you all the attention they need to

feel comfortable. When everything harmonizes the right way (deal matches investor which matches timing) the investor should be writing the check without issue.

If you and the investor look at managing the investment rationally, you’d come to the following conclusions:

• Even if you were a full time real estate investor, your time allocation would be different; therefore, you can demonstrate how the attention to their investment would be the same either way. This is not a bad thing at all. Remember, you should be showing the investor that you are growing your business. Growing your business requires time commitment to bringing in new private capital and finding new projects. Show them how you will take care of their money – being highly selective on which projects you buy, maintaining discipline in your operations.

• Compare and contrast how you will take care of their money compared to a mutual fund manager or other investment advisor. Most investment advisors (the good ones) have many different clients they work with. Unless the private investor is ultra-high net worth (so rich that they have their own personal full time financial advisor) then chances are their account is just one of many to the financial advisor and investment company. In fact, for most alternative investments, your private investor is going to be treated like a number. By demonstrating how much attention and care their investment with you will get, you can put their mind completely at ease…

• Many “part-time” real estate investors dedicate at least as much or more time to their investing business than their regular jobs. If you spend 30 or more hours per week on your investing business, then you are pretty close to full time status. Just because you don’t derive your entire income from real estate investing yet, doesn’t mean that you aren’t 100% dedicated to building wealth for your investors and yourself.
  

Use the above techniques to overcome any objections, either stated by the investor or as they arise in your thought process. I’ve found that many times the biggest obstacles in the way of getting private money are the ones that real estate investors put in their own way.

If your putting mental blocks in front of you, such as thinking you can’t get private money because you’re not a full time investor, you are only impeding your own progress. When you follow the right steps and provide the right investment opportunity, the investor will feel like they are missing out for not investing the funds with you.

Private money (money that another person invests with you in real estate for a handsome return on investment) is the best means to pay CASH – which means you get the best deals. I don’t know of very many asset managers at big banks, the ones whose job it is to unload foreclosed real estate by the million dollar chunk, that like to entertain offers contingent on financing.

Private Money for real estate investing is your single best source to get the cash you need to close the best deals.

If you are making offers contingent on mortgage or hard money financing, you may be paying 15%-20% too much for every deal you do. This adds up to THOUSANDS of dollars in lost profits and pushes your goals that much further away. Why?….

Think about it: why would a bank take a discount from their asking price if they cannot be sure that the deal will close? The bank would be taking their property off the market (which could cost them a sure buyer) and…wait…. and… wait… and… wait…and… wait for you to get your mortgage.

In addition, the bank whose property you are buying knows full well that the mortgage you are trying to get may not even close, because of some obscure technicality or whim of a loan approval officer having a bad day. And, more importantly, the banks you are trying to get your financing from are probably in the same boat as the one who is trying to unload their foreclosure properties – BROKE! Your bank or mortgage company isn’t going to be super-eager to finance a house that their buddy bank just took a bath on.

Now, let’s say you get approved and close a few deals with mortgages from banks. Since there is usually a limit to how many mortgages you can get for investment properties (currently it is 4 or 5, depending on our good friends at the mortgage companies and government) – so your profits are pinched and pulled. I don’t know about you, but I like the idea of having more than 4 or 5 properties in my portfolio. Even if you want to flip houses or wholesale, you will still be greatly limited in your real estate investing business by forces beyond your control. This is not the way to make big money.

Each day you delay getting private money, you are missing a HUGE opportunity to capitalize on the “all you can eat” buffet of bargain real estate. Grab a free copy of my audio CD Secrets of Private Money Revealed to learn the techniques that I have used and taught countless real estate investors across the country to get tons of private money to do any kind of real estate deal.

Hard Money is NOT Private Money

I’m going to take an informal poll today. Raise your hands (by clicking below) if you would

• Like to: pay high interest rates, points and have extremely short term financing
• Like to: pay lower interest rates, no points and have all the cash you need for as long as you need it

As the results come in from across the country, you can see that most real estate investors, whether you are flipping single family houses or buying apartment buildings or commercial real estate, prefer long term financing with lower interest rates and no points. If this is what you prefer

Before you stop me, saying something like: “But, Adam, I just want to get the deal done, I don’t care what type of financing I have to get
Private Money – Every Day

For me, private money is the single most important part of my real estate business. It doesn’t matter what technique or system you have for acquiring deals what technique or system you have for selling or operating deals, private money is the one key factor that will make the multi-million dollar difference for you. Don’t believe me? Read on.

Once upon a time, in the ‘go-go’ days of the real estate market (when cheap mortgage money ruled the day), private money was an afterthought for me. Since I had worked in big corporate finance and credit decision making, I thought that I had it all figured out. For my real estate investment deals, I could just use creative selling financing and utilize my personal lines of credit or get a mortgage if need be. This worked for a time, and then…

The game changed.

It seemed like one day I woke up and the real estate market had changed overnight. My favorite mortgage brokers were nowhere to be found – they were running for cover. All of the glorious news about the housing market was no longer spilling from the TV and newspaper headlines. The seller financing and other buying techniques that other investors and I were using for single family houses and multi-family deals evaporated. My deal pipeline slowed to a trickle and then…

it want bone dry.

With no banks, mortgage companies or lines of credit to rely on, I knew I had to start drumming up private money. After my first few private money deals, I started filling my deal pipeline again. Years later, I realized that lining up private money investors to fund my deals (I like to wholesale lots of single family houses, buy larger multi-family projects and rehab and flip a few houses a month as well) was allowing me to crush banks for super-discounts and turn houses over quickly.

What was my key to getting seven figure private money sums? What did I do to stack private investors up so high that I have a waiting list of anywhere between 11 and 16 private money investors at any given point?

• I focused on private money.
• I committed myself to it.
• I set private money goals.

Every day, I told myself that I was not leaving the office until I did at least one thing (at the absolute very least, no matter what was going on in my business or in my life) to bring a private investor in. Every day, I worked on one component of my private money system, turning myself into a private money magnet.

If you want to become a private money magnet, grab yourself a FREE copy of my audio CD Secrets of Private Money Revealed.

It usually does not matter what the investors’ background is or what their purchase or sales strategy is. It does not matter if they want to buy and flip foreclosure houses or acquire apartment buildings. The fact still remains: that private money is essential to success as a real estate investor.

Private money allows you to pay cash for deals, negotiate better terms and close quickly – all of this helps you turn profits faster, filing your bank account to the point where the bank teller’s eyes get wide when you make a deposit.

Instead of “How do I get private money?” there are two better questions you should ask:

1. Where to I find private investors?
2. How do I propose a private money deal?

These questions are more specific AND action oriented.

Where Do I Find Private Investors?
Finding private investors for your real estate deals does require some action on your part (are you surprised?). The good news is you can build a war-chest of private money

The best place to start finding private investors is by mining your own contact list. Most of us know someone (or at least know someone who knows someone) that will be receptive to learning about investing in a real estate deal. As long as you are prepared and approach people the right way (it all starts with proper marketing sequencing) then the odds swing in your favor. If you ever read The Millionaire Next Door by Stanley and Danko, you know that there are many unassuming millionaires in our midst.

Since you need a contact list to contact about private money, then you should start focusing on building your contact list. The bigger your contact list, the bigger your pool of private investors. Build your contact list by regularly attending networking functions and real estate events, like your local Real Estate Investors Association (REIA).

There are other great ways to market for private money as well, and I’m going to get to those in an upcoming post.

Some of these include:

• the internet
• social media
• direct mail
• place ads
• infomercials

Again, more coming on the ‘money magnet’ front very soon.

How Do I Propose a Private Money Deal?
Proposing a private money deal is one of the biggest adrenaline rushes that you will get in business – this is what gets me to jump out of bed in the morning.

There are a few important factors to consider, the main ones being:

• You - private investors care about who they are lending money to or investing money in
• The strength of the deal – does the deal make sense and is there a good return on investment

Once you have your business plan down and a good proposal for your private money investor(s) – whether they will be a private mortgage lender or a private equity investor – you are on your way. You must always keep in mind to be the person that someone would invest money with.

Successfully proposing a private money deal comes down to matching the investors funds, needs and time frame to your project. If your project has a long time horizon and your investor has a short time horizon, the deal won’t work. If you want to pay a return of 10% interest and your investor demands 15%, the deal won’t work. The challenging (and fun) thing about putting real estate deals together is that get a chance to make substantial profits for your efforts and time involved.

Make sure you don’t rush the deal with your private investor – you want them to be comfortable and receptive to what you are offering.

When you use OPM- Other People’s Money, you can have unlimited profits and returns on investmets. I encourage you to focus on bringing private money into your business. You won’t regret telling your banker or mortgage broker to take a hike!