When Is It Time To Fire Your Private Lender From Your Real Estate Business?
WAIT A MINUTE ALAN! We've spent all this time and effort to get private lenders
and now you send us a newsletter on firing them! What are you thinking?!Well, stay with me here and I'll explain. I love my private lenders. We get along great and I make sure of that. Up to this point we've talked about how to attract and keep private lenders and many of our future newsletters will continue with information just like that. If you don't have private lenders at this point, being selective about them may be something you've never even considered.
Once you've done your homework, gotten your real estate education, and taken all the steps needed to attract private lenders, you could quite possibly have many of them offering to do business with you. This is an awesome position to be in and gives you a great opportunity to work with some pretty fantastic folks.
What are some scenarios where I might not work with a private lender who is trying to throw wads of cash at me?
1) They want to be too involved.
2) They want to loan a great deal of money.
3) You simply are not ready to go to the next level.
Let's look at each of these a little more closely.
1) They want to be too involved...
I've spent tens of thousands of dollars on my education and have been in the business for over 9 years, I know how to do this business. I have definite ideas about the way I want to run my Real Estate business. I attend at least one seminar almost every month. I'm always striving to learn and to improve.
Sometimes a well-meaning soul will want to "help" me by offering advice in an area where frankly, I'm an expert, and they have little or no experience.
You are going to run into these folks. This is where you need to have a solid education so you don't get sidetracked. I can work with most private lenders. They give me money; I send them interest payments.
Let's be clear on your private lender's job. Their job is to write a check and then set back and wait for a bigger check.
It is the American Dream.
Once in awhile you will find that someone wants to work "with" you and maybe even be a partner.
They believe that the money they invest in your business gives them the right to offer advice and they expect you to take it, in the way you run your office, what properties you purchase, what rehab workers you hire, and so forth.
Just be aware that some folks will want to be a partner and if this is not what you want, be prepared to correct the situation before it goes too far in the relationship.
To be honest, I stop it on DAY ONE.
My advice is to always be professional about it. I'm gracious. I simply explain my position and my rational for what I do.
2) They want to loan a great deal of money...
Gee, talk about the American Dream.
Sounds pretty good doesn't it? You've probably thought, "Hey, if I could find just one lender with a ton of money, I'd have it made." Well, let's look at this a minute. You've heard the saying that putting all your eggs in one basket is a bad idea. Having one lender is like having all your eggs in one basket. Life can change in a heartbeat and if that one lender needs to quickly pull out his or her money you are out of business!
Today, one of my private lenders died.
She had retired from her job of 20+ years in September and invested her retirement funds with me in October.
What if she was my only lender with millions loaned?
What decisions are her beneficiaries going to make?
Thanks goodness she was not my only lender.
If you have ten solid lenders and one has to pull out, you simply make adjustments (replace one lender's funds with another) and continue business as usual.
Having multiple lenders makes your business more secure.
3) You simply are not ready to go to the next level...
a) Maybe you are satisfied with where you're at
OR
b) Maybe you haven't done your 1st deal and you don't want to go out and promise folks you'll get their money working and then find out you can't perform.
If it is the 2nd item, let's talk about it.
The other day I did a teleconference with another national speaker.
We got asked the question...
"What would you do first, find a deal or find private money?"
He said "Find a deal and then go find the money because it gives you the incentive to make it happen."
I answered just the opposite because having private money will give you the confidence when you make offers that you are going to be able to close.
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