Now that the mortgage market for buying investment real estate is almost dead, investors must have other sources available or go out of business. Fannie and Freddie will no longer be available for investor mortgages, traditional banks and savings and loans will not affect investor loans for many years, and hard money lenders, when available, may have a higher total cost 25%.
The answer is private money raised from people, not banks, through a process called private loans. These are the four main ways to attract and develop your pool of private lenders.
Private loan pool presentations
A private loan presentation involves gathering 5 to 20 people in a room and giving a group presentation that explains the details and benefits of your private loan program. This may not be for everyone, depending on your comfort level when speaking in front of a group of people. But there is a great advantage to having group meetings. When people start asking questions and telling positive stories, a certain level of groupthink begins to take effect and can be very powerful for attendees.
One-on-one meetings
If you are not comfortable with group meetings, individual meetings are a great alternative. I usually recommend a breakfast meeting in a quiet restaurant where you can spend 15 to 45 minutes with your potential client. As in the group meeting, you need to establish the details and benefits of your private loan program.
Out of Town Perspectives – Credibility Kit
If the potential prospect is out of town, you will need a good credibility kit that you can mail in. It is very important to follow up two to three days after the package is shipped to see if you have any questions. Even if they don’t get involved right away, stay in touch and they may spend some time down the road after a series of follow-up contacts.
Existing private lenders
If you already have a private lender or lenders, be sure to keep asking them if they would like to participate in more deals. You will be surprised that most investors only make a small investment to get started and wait to see how things turn out before giving you more money. So keep asking and do what you say you are going to do, they will develop a better relationship and level of trust with you. As the relationship grows, they will invest larger and larger sums to grow their real estate investment business.