Finding Private Investors - Posted by BobJ (Md)

Posted by andy_pa on May 05, 2004 at 21:53:23:

two questions,

  1. What are the terms as far as time before cashing them (private investors) out?

  2. Any suggestions for marketing for private lenders?


Finding Private Investors - Posted by BobJ (Md)

Posted by BobJ (Md) on July 23, 2003 at 11:10:22:

My game plan is to rehab 2-4 properties a year to raise capital that I then invest in small multifamily buy-and-hold properties. I have a good relationship with my commercial banker on the buy-and-hold properties, but arranging the short-term rehab funding always seems to be a hassle. Lately, I’ve been thinking about finding some private investors who want to get a nice return on their money. The idea is that I’d still pay a good interest rate, but wouldn’t be stuck with the huge up-front costs (points) of going through a traditional HML/broker.

It seems to me that there should be a lot of people who have their money sitting in retirement plans, CDs, T-Bills and such that would like a better return on their money. I just don’t know how to find them. Any suggestions? Somehow, I think an ad in the local Penny Saver isn’t going to flush them out. I also have gut feeling that a lot of these people know each other, and that once I get introduced into that community of folks, finding further investors won’t be a problem. Is this accurate?

Also, if I’m dealing directly with private investors, am I going to run into any sort of securities laws if I’m doing individual deals? Or is that only if I was selling “shares” in some sort of a speculative arrangement - taking the money in advance, looking for properties to invest in, and offering to split the profits?

BobJ (Md)

Re: Finding Private Investors - Posted by patrick

Posted by patrick on July 26, 2003 at 16:20:21:

try a rehab bank the one I use has short term loans from 6 months to 2 yrs no down payment only minimal closing cost but they do charge 13.8 interest ONLY
a 42000 loan cost me 400 per month they loan on aquisision and fix up and base there amount on arv(after repair value)I work thru ready mortgage out of dallas.

Re: Finding Private Investors - Posted by jasonrei

Posted by jasonrei on July 25, 2003 at 10:16:46:

I also look for private money. These are my sources:

  1. Couple of friends who inherited money & were getting killed in the stock market
  2. A lady I used to work for
  3. After I had a few deals under my belt I networked with relatives, a couple have come thru
  4. A couple across the street from a house I was selling. Got to know them. A relative of theirs also got in.
  5. Another friend got in.
  6. My old doctor.
  7. Two guys I buy materials from are gonna get in.

Most is secured with mortgages on rehab properties. These lenders have given me $500,000 and I expect them to increase to $900,000 in next 12 months. I expect another $500,000 from untapped sources & referrals in that time. I pay 10-15%. The secured money has always been reinvested after a deal sells. In a year I think I will have $1,500,000 in private money and $500,000 in a bank line-of-credit.

The first lenders got in when I only had a couple of rentals. I used that to buy fixers. With more success I got more private money, then had to go to hard-money. After about 20 deals the private money opened up. I didn’t buy my first rehab until February 2002. Some keys to my getting private money:

  1. I’m confident and know what I’m talking about. I back it up with a website showing my progress. I’ll provide any proof they need, but they just don’t ask.
  2. I pay very good interest (high, but without points & fees).
  3. I provide VERY good security. On secured money I will only borrow purchase + rehab. I don’t like to borrow my future profit. If something bad happened (and I can’t imagine anything bad happening) I want my lenders to just be able to make a couple of phonecalls (attorney, RE agent, two RE investors) and get out of a deal with more than their investment.
  4. I give them nice proposals in simple language. STEP 1, STEP 2, etc. I don’t want them to be confused at any point.
  5. I ask for the money.