“There is probably not more than one hundred dollars in cash in circulation today. That is, if you were to call in all the bills and silver and gold in the country at noon tomorrow and pile them on the table, you would find that you had just about one hundred dollars, with perhaps several Canadian pennies and a few peppermint Life Savers.” – Robert Benchley
In Message #1786, I explained that one of the most critical elements of real estate investing is where to find the money to fund your deals. And I said there are 6 sources that most investors use, but which I have found to limit my profitability and control … and waste my precious time:
1. Banks 2. Credit cards 3. Lines of credit 4. Creative techniques with the seller 5. Partner(s) 6. Hard-money lenders
In that article, I discussed the pitfalls of each of these sources of cash, and suggested that with Private Money Lending, you can avoid the headaches and increase your profitability.
Why I Turned to Private Money Lending
My burning desire to finally become a full-time real estate investor had come to fruition. I quit my full-time job of 17 years in November of 2001. With this career change, banks did not want to touch me with a 10-foot pole. I immediately needed to face the nagging problem: “Where do I find private investors to fund my real estate deals?”
Without a serious influx of cash to acquire and rehab properties, I would not be able to take my business where I wanted it to go.
Funding was a part of the business that I had neglected. It had been sitting on a back burner, but now moved up to my number one business priority.
I decided to implement a few key marketing strategies to attract private investors.
When I took that step, everything changed for the better.
How My Real Estate Business Took Off With Unlimited Cash
What are some of the advantages of using private money for your real estate investments?
1. Fast access to cash means you can often buy property at a discount.
2. You don’t have to deal with credit checks, and the load doesn’t show up on your credit report.
3. You have access to unlimited funds. Within four months of marketing for private lenders, I had more cash than houses, and my network just keeps growing.
4. You have control. You set the rules. And you don’t have any partners to argue with, which saves time and money.
5. You can help your friends and family who invest with you by providing a high return for their money. You also create genuine relationships with other private lenders who help you grow your business. You are not a number or a balance sheet to these people.
6. You can get some of your profit when you buy.
7. You don’t have to make monthly payments, so you have cash to work with. You pay off your loan once you sell.
8. Private loans are far more flexible than most other financing. As long as you and the lender agree, you should be able to structure the loan to suit your needs.
9. You can make offers with confidence. No bank has to come and qualify the property.
10. You can structure quick and more profitable exit strategies for selling without pre-payment penalties.
11. You save money, because you have no down payment, no points, no shared profits.
12. You can fund the purchase of defaulted paper. (When dealing with foreclosures, there is often no time to wait for approval of a traditional loan.)
In essence, private loans can help you build a foundation for a very profitable business buying and selling homes.
In this business, when a deal comes along, you have to move fast. Many investors have watched a deal slip through their hands while they waited for the bank to approve their loan. But when you have private money available, that won’t happen to you. You can make an offer knowing you can go ahead and set a closing date. Meanwhile, your competition is wondering how you did it so quickly![Ed. Note: Alan Cowgill is a speaker, author, and real estate entrepreneur who has bought or sold over 200 investment properties. You are invited to join a select group of Early to Rise readers in an exclusive teleseminar and listen to Alan speak about how to secure private money and use the cash to propel your real estate business. Learn more now.