Hello all, I have a question regarding lending. Im looking for a little push in the right direction as far as how to pitch a proposal for an investor loan. Situation: The investor Ive got in mind is someone my partner has worked with before in an industry outside of real estate, so there is some familiarity there. We already own the property (SFH intended for rental income) and ultimately need about $6k (small, I know) for all repairs. All things considered, well net about $450-$500 a month from rent. Cutting to the chase: Weve never had to look for outside money so Im completely unfamiliar with how to even begin the conversation or how to make it attractive to him. No idea what the figures should be as far as interest or a reasonable time frame to offer for his return. Up until now weve always purchased and rehabbed with our own cash. So I guess my question is, how do these deals usually work as far as time and interest? How much time do outside investors allow before they want their cash back and how much are they generally looking to profit? Ive heard some hard money lenders wanting to be paid back as early is just a couple months. Thank anyone and everyone for their time.
Xavier Bowen: For 6k go to a credit union and take out a personal loan for couple years. Might be 7-9% interest with no collateral
Xavier Bowen: Wait till you need more money to start asking investors and offering bigger returns
James Larson: As I said, this is someone I have somewhat of a connection to and hes in this range of investing. This is certainly nothing Id approach a multimillionaire with.
Xavier Bowen: Do as you please… I personally dont see the point in putting a 6,000 mortgage on a property you have closing costs, attorney fees etc and to make it worth while for investor. If you have local credit union you can pull personal loan and no lien on your property. 6k loan at 8% for 3 years is $180 a month. Hell go pull 8k and go on a vacation too. ðŸ˜Ž let the tenant pay it back
James Larson: lol I get you, but as I said in my post, I already own the property free and clear. The loan is for repairs. Either way, appreciate the input ðŸ‘ðŸ½
Brinley Rogers: Is the property not liveable currently? What repairs are needed and are you doing any of them yourself? There are multiple options… Id offer the property up for owner finance, use the down payment from the buyer for the repairs. If they default, they have paid your repairs for you and if they fulfil their obligation, you have made solid money on the back end by selling the home close to retail. Just my thinking though
James Larson: Not liveable but all repairs are cosmetic. 2-3 week job at the most. But again, it was purchased to be put up for rent so selling at this time isnt an option. Had it been a flip, this would be a much easier pitch. I just dont want to suggest to…See more
Brinley Rogers: Regarding the approach I mentioned, whats the difference in renting the property to someone vs financing the property for 10 to 15 years? You collect regular payments, as well as interest… As far as going for private money, I offer my lenders a 1…See more
Brinley Rogers: I should clarify that the 16% return is based on short term loans for flipping. Best of luck with it man
James Larson: Best answer yet. Private lending isnt something he officially does, I just wanted to examine another approach beyond Hey I need $6k to finish up this project and Ill pay you back. I figured adding some interest would make it more attractive and w…See more
Brinley Rogers: Just a heads up that if you have renters waiting, you may be able to get a rent increase. Check to make sure that you arent leaving money on the table
Brinley Rogers: By the way, my comment of not being able to fade 6k wasnt a dig at you, Im just pointing out what a private investor would ask. Also, I got started in real estate with 6k, so I know the importance of being creative
James Larson: I fully understand
Elaina Robbins: Hey Elroy! Great question! Im going to offer two suggestions. Keep in mind, this is the alley where SEC regulations may come in and having some education will help you avoid making illegal claims. Even with some education, I highly recommend working with an attorney who practices SEC related laws. I usually use self-directed retirement accounts to fund most of my deals. That being said, I go about raising funds in two ways with individuals that I have private relationships with. One… I position them as a private lender. I usually give them 8~12% annualized return within 6-8 months of repayment. You can structure it to where you can make a balloon payment at the completion of the project. No upfront points and no prepayment penalties! Two… I make them an indirect partner through IRA LLC which allows them to use their retirement account in which the retirement plan would be 50% ownership of the LLC. I would have the other half. There are ton of rules that go with IRA LLCs, so talk to an attorney about it! My conversation almost always starts with Hey (name), without getting too nosey or personal here, do you currently have a retirement account? … Just a ballpark figure, How much are you currently getting in your current investments? … If I can show you how you can earn double digit returns secured by real estate, would you be open to having a conversation with me?. I learned all of this through a set of full blown classes about fix and flip.