There are a number of sources private lenders can use to take advantage of the incredible investment opportunities open to them, and many alternate ways of funding a real estate deal that don’t require any of your own cash or credit. We will discuss some of the options and various ways to fund your deals! The first one is to help you think outside the box. Explore this strategy that will help you recruit funds.
Strategy #1: Private Money Lenders and CASH
If you are familiar with the expression “fast money wins” or “cash is king”, then you know why this is the quickest way to monetize your deals….. with one condition. The cash you use in funding your deals should belong to a private money lender ! Develop networks for private money loans with contacts who will become your private mortgage lenders.
Your own cash reserves are there for you and your household to live on. Don’t assume a professional investor puts his own money into his real estate deals. Of course not! Traditional lenders expect you to have a cash down payment so that you have a stake in the game . It’s acceptable to combine cash with other types of funding . Just make sure that the cash comes from another source . Just as you would, the private lenders you work with have capital allocated specifically for investment opportunities . Utilize their money to maximize your leverage and ability to build the most profitable real estate portfolio available in the shortest amount of time.Private money loans from these resources will monetize your deals.
Cash held in most types of bank accounts can be accessed fast and can fund your deals in minutes instead of weeks . Fees are generally low for wire transfers and cashier’s checks.
Most people don’t have large cash reserves that are not in some form of investment account such as a CD, IRA, or money market account. This could limit the amount of funds available to you initially , so be sure to keep cash moving for your lenders to entice them to keep their money in reserves to fund your deals.
Although it’s not always necessary for you to pay points to your private lenders, doing so may entice them to keep their money in a liquid state, not tie it up for longer time periods in low-yielding financial instruments like CD’s and bonds. Consider offering your lenders the option to withdraw their funds early with no penalty in case of emergency. As long as they can give you 30-45 days notice, offer not to charge them for an early payoff request. This is a welcome benefit to private lenders, building confidence and comfort. They are used to early withdrawal penalties from most financial institutions on fixed term investments. Having the resource of a listing of private mortgage lenders frees you to take advantage of the best deals…fast money wins.