3 Raising Private Money Secrets
One of the myths about raising private money for real estate is that you need a lot
of experience and a complete credibility kit in hand before you will ever succeed. The fact is, that couldn't be further from the truth. And, as you are about to learn, these all too common myths are in some cases actually hurting your chance to succeed. Today I am going to share with you most common problem real estate investors encounter when first trying to raise private money and teach you 3 simple solutions you can use to overcome this trouble spot.
The most common problem that most real estate investors encounter when trying to raise private money really has nothing to do with real estate investing, private money, nor your credibility. It is all too often a simple lack of confidence. Now, because you have been taught time and time again that without massive credibility and experience you won't succeed in raising private money the lack of confidence is a natural result of your learning environment. And, unfortunately you have most likely believed it this myth and fallen prey to failed results.
The truth is, your potential private money lenders are interested in three primary things. I want you to write these down and take good notes because in my ten years as a real estate investor I have found that these understanding and addressing these three things correctly are absolutely critical to your success in raising private money.
First, your potential private money lenders are interested in you. Now, at first glance, that looks and might even sound like you need experience to succeed. The fact is people with private money want to know that you are knowledgeable, trustworthy and consistent. When you speak, do you speak with confidence? Your potential private money lenders want to hear that you have a plan and a strategy to buy low, manage the property or construction project and rent or sell. I created and use a private lender guide for my real estate investing company as the basis from which to educate my potential private money lenders about becoming a private money lender. You see, it's not about a PowerPoint presentation, it is about consistent, knowledgeable answers to the questions your potential private money lenders want to know.
Second, your potential private lenders are interested in reducing their risk. This question in your potential private money lenders mind is all about how they are going to get the money the lend to you back. You see, their first concern is not in getting a return on their money, but rather a return of their money. So, you must focus on reducing risk, before you can ever teach them about how you can pay a high interest rate on money borrowed. And, within the context of the things that you can control, it is important to show your potential private money lenders that you have a good exit strategy plan. Be up front with them and talk about their worst day.
Third, your potential private money lenders are interested in a return on their money. Last, but not least, your potential private money lenders are interested in being paid a higher rate of return on their money than they are currently getting in the stock market, in a money market, in a bank CD or in their retirement accounts to name just a few spots. The key is to educate your potential private money lenders on how and why you can pay them higher interest rates when you borrow their money. Be up front and show them the potential profit and it will reduce the anxiety they feel that tells them that it might be too good to be true.
The bottom line is you must help your potential private money lenders become informed. Teach them about your strategies, teach them the safeguards you put in place to help reduce their risks and teach them about the potential that lending private money offers them. Follow these three critical points during your presentations with your potential private money lenders and you will be much closer to succeeding in raising private money.
by: Rob Swanson
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