Holy smokes I have to get this off my chest before I check myself into the hospital to have a stent put in a rapidly clogging artery….

I wish I had a “bat phone” to all real estate investors where they could tie into this one message:

Please, Please, Please don’t overpay for your private money!

Remember how I always talk about not being ‘needy’ when it comes to private money? You remember the old adage: “bankers only lend money to those that don’t need it?”

Pay close attention ’cause this is important stuff.  It could mean the difference between $200k or more per year in income to you.

Here’s what I’m talking about…

Let’s say you have a deal and it’s a good one. You’re locked in on a nice bank-owned property that you can buy for $100k, put $10k rehab into it and sell for $150k. I’m getting excited – after taking commissions and other selling costs into consideration that’s a (conservative) $35k profit for those with no abacus, slide rule, calculator, spreadsheet or little Capuchin monkey on your shoulder. You plan on no more than 60 days from start to finish.

Juicy.

Great, so now you go to your private investor who has already committed funds to you and they like the deal. They can invest the entire $110k + a little “slop money” for holding costs. (You should always have “slop money” for every deal – it’s like the old American Express Card commercials – don’t leave the closing table with out it). Probably $5k in slop money is OK for this deal.

Sweet.

Now we’re really cookin’ with gas. Big payday just around the corner. But, quick snag in the line…

Private investor wants to talk to you.

Seems that you told them they’d be getting a 10% return on their money. You did tell them that. What’s the big deal? Read More→