How to find Private Lenders

By
Services for Real Estate Pros with Striker Realty: Investment Specialist

It's hard to get started in Real Estate Investing if you do not have your own funds.  The only option is to find private lenders who will fund your deal. However, it is the age old problem: no experience in flipping or wholesaling, no confidence in a lender.  So how does a beginner find a private lender?

I could tell you to "just jump in".  Most of you know that I have lenders for over $500K. So if you have a commercial project or residential  portfolio over $500K, I can get you funded. However, this is risky for a beginner.  Larger projects should be undertaken "after you have experience."  Thus the catch22.  So the advise is "start small."  Well here's the problem: most professional private lenders only lend over $500K.  And you do not have investment funds. You can borrow from friends and family.  Not a good way to develop relationships or keep relationships. Sometimes this works.

Let's look at some alternatives but first let's understand the business  model:

You buy undervalued homes and you flip and sell it:

As an example: $150K purchase price

                               $30K  Rehab 

ARV: After Repair Value: $250K

Down Payment     $10K

You need: $170K plus closing costs (both buying and then selling)

Good profit: $60K with a flip and re-sell for wholesale or retail

within three months.

The risk:  it doesn't resell and you have to hold the property until you can.  You reduce it for quick wholesale down to $210K and get out with $30K. your relatives are  upset- it took 8 months and not 3 and not a great profit.  All your money is tied up during this process and you can't work on another house. 

Here's the alternative:  get a business Line of Credit (called a LOC).

They have no doc, no revenue, low credit score, non-recourse,  LOCs up to $200K.  Since it is a line of credit you can take funds and then replenish them at your own pace.  You control it and it allows you to grow until you can get the experience and knowledge to do a larger deal. 

LOCs are check book controlled and the seller would never know it was a credit line. In fact, it is a CASH deal-- your cash. 

The best way to get started is with your own LOC.  Additionally, you are building credit for your LLC.  A much needed step in becoming independently wealthy in Real Estate.

 Of course, if you are looking for private lenders and are over $500K contact us for an intake sheet for your project.  We represent a private lenders club that has hundreds of lenders for your commercial projects.  happy hunting.

Comments (1)

Greg Nino
RE/MAX Compass, formerly RE/MAX WHP - Houston, TX
Houston, Texas

this is a great read.

May 31, 2012 04:11 AM