When it’s time to grow your real estate investment business, private money is one of the most lucrative sources of funding capital. Many hard money lenders offer 100% financing on promising residential property purchases and rehabilitation investments. These X tips can help you locate and attract private money lenders for real estate who are willing to fund your project and back your business.
Show the Numbers
Once you’ve already flipped a few properties and earned your investment back and then some, private money lenders will be intrigued by your track record. After all, a good real estate deal can return 10% or more on the lender’s initial buy-in, a larger increase with a faster turnaround time than with traditional investments like the stock market. Prepare to show potential investors a track record of smart investments and outstanding returns by documenting everything about each of your deals. These details, from spreadsheets of the financials to before and after photo and video, will be a valuable tool for attracting hard money investors.
When you apply for a real estate loan from a bank or credit union, you’ll need to show evidence of your credit rating, liquid assets and overall financial standing. Although an investment property lender does consider these factors, they are much more interested in your track record of successful deals. For your first loan of this kind, you’ll need to convince the investor that your business is worth the leap of faith. Over time, you’ll be able to access more flexibility and better financing terms as you prove your company’s ability to make money for your investors; which is one reason you should also research the different types of interest rates on these loans.
Leverage Your Network
Networking is a critical part of any entrepreneurial endeavor, and social media channels make it easier than ever to show off the results of your hard work. Make sure family, friends, professional acquaintances and others in your circle know that you have started a real estate business and that you are seeking funds for deals. You’ll never know who may be willing to invest in a successful residential property venture. Beautiful before and after photos of your flipped properties will encourage your network to share and spread the word.
Have Skin in the Game
Hard money lenders rarely provide financing for more than 50 to 70% of the purchase price of the property. Having some level of equity (use a release equity calculator to estimate) in the property before approaching investors demonstrates your commitment to the deal. If you are unable to come up with some of the capital, private investors may be concerned that you are too inexperienced to pull off a successful deal. Most real estate flippers who have already bought and sold a few properties are able to put those funds toward the next promising project.
Whether you need a residential bridge loan, rehab loans or funds to purchase a distressed property, hard money lenders provide private funding for everything from single family homes to multi-family apartment buildings and even commercial investments. Once you get your feet wet in the world of real estate investing, take advantage of your success by seeking partnerships from private lenders who will be eager to finance a lucrative deal.