I was about 8 and I was psyched. I found all this free, super cool, stuff. It mattered not that I was having to climb onto the side of a dumpster to pull out these discarded treats. One particular thing I found, besides a nude statue of a couple in a romantic embrace which I gave to my super conservative mother, was a broken hamster cage. My sister had dropped my class hamster that I brought home for the weekend and…well… Let’s just say I was the last kid to take home Mr. Fluffers. Somehow, I thought that I could provide a good home for a hamster.
I take this broken cage home and work hard to piece it together with some Elmer’s glue, scotch tape, and a lot of blind enthusiasm. I decide to shake-down the house for things to build this elaborate hamster-fun-park-maze-thingy. Great! All I need is a hamster!
I find my mother seeking out a suitable hiding place for the piece of modern art I gifted her but at this point I don’t care. I want a hamster. “Mom. I need a hamster.”
“Great hunny.” She smiles at me. “Get your money together and we can go by the pet store when we go to the grocery store”
That was easy!! Awesome!! Wait! Money? I have to buy a hamster?! Seriously? We got our cat for free.
Then she brings it home…still smiling, “Don’t forget the food and shavings. Be sure to bring enough for that.”…I am still in awe as to how she was able to crush the dreams of her own offspring like that.
Ok, I had like 10 cents (Sidebar: there is no symbol for cents any longer in Word, you know the c with a line through it. Seriously? Is it ridiculous to think that I might want to talk about something that cost less than a buck?) Back to the story...
So my mom was crushing my dreams four dollars at a time… I was realizing that I had the one dime left from my 90 cent lunch the day I did not get a 10 cent giant cookie. This could be a lesson on how I worked hard and saved my dimes for months and stepped up selling catalogue jewelry. But this is about private money.
I realized that I needed about $12 to make my hamster dreams come true. I also had two phone numbers memorized besides my own, my grandma and my aunt.
I call them and let them know all of the benefits to my hamster possession. 1. Mom is ok with it. 2. It will teach me responsibility. 3. I already dug a cage out of the dumpster and “fixed” it. 4. My sister can finally get over her accidental hampstercide incident. 5. I would pay them back an extra dollar, because I knew nothing of interest.
I end up getting my aunt and grandma to pledge the $12. I could get it the next time I saw them.
This was my first pitch for private money and I didn’t even know it.
Did I get the hamster? No. By the time I saw my grandmother and aunt I had long forgotten about Mr. Fluffers Jr and it seemed they forgot about my $12.
Fast forward to present… Here we are busting our bollocks to get a reasonable offer accepted only to realize….You are broke. Got no money. What do you do?
You can try to wholesale it. If that is your option I suggest reading this post here. It is about just that.
Today we are going to talk about getting money so that YOU can flip. In fact I am going to guide you step by step through the ways to do this. We are going to look into finding both hard and private money.
1. Professional private loan services. These businesses are designed to lend to investors. They will lend from 60% to 100% of the acquisition and/or rehab funding. You will have to qualify in one way or another for this loan. You may need credit, equity, cash, or any combination therein. There are others as well but it often depends on your location as to who you can use.
2. Local hard money. This, my friends, is your most sure shot. Your local hard money lender will be the best bet for funding a good deal. (S)he knows the market in your area and is not afraid of it. This person can and will assist you in making a good offer…mostly by default. They will not fund a bad deal. Take their advice.
The local hard money lender generally does not have a billboard, ad on craigslist, or even a website. It is unnecessary. How is it they can stay in business without any marketing? Simple, people will find them the same way you will find them. Word of mouth. The best way to find your local hard money lender is to find your local flipper. (S)he will probably know who is lending in the area even if (s)he has outgrown the need for such money.
The last two are in the business of lending money to investors. The down side is that they KNOW the value and importance they hold and tend charge high points and interest. This is all fine and dandy when you have no other option but wouldn’t it be better if you could put a few extra bucks in your pocket? This is where private money comes in.
Private money is capital from a private person who wants a high rate of return from a secured investment. You just need to find them. Here is how…
3. Prepare your PMP (Private Money Packet). This is a professional looking, professionally printed, marketing tool that you will give to persons who have interest in being your private lender. This can be a brochure or a book. The choice is yours. The fact remains that you need it.
4. Practice your 30 Second intro. People have short attention spans. You need to peak their interest in the first few seconds of the conversation. A sample convo could go like this:
Bob: “I hear you’ve been buying and selling a bunch of houses. What did you win the lottery or something?”
Notice, Bob is a hater right now. He is super jelly. Turn it around.
“I wish I won the lottery, bro. I couldn’t do it without the help of folks just like you who want to make a secure, high, interest return.”
Get Bob intrigued in how he can help you and make moola!
5. Know why you are offering the safest high yield investment. I know it might seem a bit intimidating to go ask people for money. What are you a pan handler? You are looking at this all wrong. You are offering people the opportunity get ahead of inflation, to have security in their investments.
How can you save for your future when you actually lose 2.65% of your savings to inflation? That means if you had $50,000 in savings in today it would be worth the equivalent of $39,523.48 in ten years. What about stocks? That is always a gamble. Sometimes the outcome is positive but you run the risk of low security. How about a money market or a savings account? The security is great but the returns are far less than the rate of inflation.
You are offering interest rates between 8-12%. That is way above what one would get from any secure investment like a savings account or money market.
You are offering the security of being in first or second lien position on the title with significant equity. You are offering the security of a promissory note and mortgage making you legally bound to the payments as agreed. This offers way more security than stocks in a volatile market.
6. Pitch everyone. You need to pitch everyone you know, meet, love, hate…whatever. You start with your family. Move to your friends. Move to your family and friend’s friends. Pitch your church. Let them know that you can grow the fund for the new wing even faster than the money market they are stuffing it in right now. That might as well be an old mattress.
I have seen many people suggest that you send out direct mailers and host seminars and such. I, personally, have found this to be an expensive way to be disappointed.
7. Help them find money for you. The most common objection will be “I don’t have that kind of money.” Many people actually do have access to more than they think. A couple of examples are equity and retirement. If one has equity in their home, a HELOC offers a low rate and there is an opportunity to make some moola. Do they have a decent retirement? A self –directed IRA allows them to invest in real estate inside their retirement. For more information on using real estate in your retirement click here.
Now that you are armed with the tools to get funded, go make offers!!! Be amazing!!! GET THAT HAMSTER!!!!
Happy investing my real estate junkies!!!
I was born an entrepreneur. I am pretty certain that I was peddling passies in the hospital when the nurses left the room.All of the other kids in the neighborhood were riding bikes and playing with dolls I was selling jewelry out of a catalogue and creating a back yard consignment shop. At 21 I became a real estate investor and fell in love. This was/is/ and always will be my passion. I have been madly in love with flipping, holding, and writing offers on real estate that seem crazy for 18 years. Ladies and gents I am willing to share the love of my life with you. Maybe its polyamory maybe its jut because I can’t shut up about it. Either way I will be sharing every mistake I ever made and the lesson that came from it. I love questions. Please ask away!!!