With all of the uncertainty in the country and the economy right now, “Where do I put my money?” is a question that I am hearing more frequently. People are nervous and are looking for a safe and stable place to park their hard earned funds. As a real estate investor you should strive to be that “safe and stable” place.
If you want to increase the size of your real estate portfolio, and are not independently wealthy, you will need funds. Funds from commonly known sources such as a mortgage broker or commercial bank can quickly dry up, be pulled, or come with too many strings attached. Borrowing funds from everyday people like you and me can and should be a key tool in your real estate investing tool box.
The thing is however many people do not realize nor understand that they can lend their money to individuals and have it backed by the security of real estate. They believe that the stock market, bonds or a money market account are the only options available. A stock broker is where they will turn for advice and you can rest assured that the broker will not tell them about the private lending option.
You have to be ready to tell them about the safe and stable private lending option. But how? You can potentially run afoul of securities law if you advertise or actively solicit private funds. So that option is out. You best bet is to be ready when you sense an opportunity. Be ready when someone asks the question “Where do I put my money?”
When you hear that question, answer with “Why not invest with me, earn a nice return and be secured by real estate?” Most will be intrigued but skeptical. You will most likely have to overcome that skepticism and honestly, that can be difficult to do.
Start overcoming it by sounding and acting confident about what you do. Have a succinct elevator speech rehearsed. If you get a bite, be ready with examples and numbers. Of course this all will take some homework on your part. You have to understand your market, your needs, your business and how financing works.
You also have to practice what you intend to say. Do not try to sound pushy, overbearing or too sales like. You want the conversation to flow naturally. You want you potential lender to feel at ease.
Then be ready to follow up with documentation. Be prepared to demonstrate the safety and stability of investing with you, because very few are simply going to take your word for it. If they do you likely do not want them as investors anyway. Be prepared to show actual property examples if you can. Be prepared with an electronic bank book, already prepared and uploaded into Dropbox so that all you need for them to do is click on a link.. Be prepared with sample documents that demonstrate how their money will be secured. Have a sample note and deed of trust, drawn by an attorney, for them to review.
Finally, give them time to make a decision. They will likely have questions. Do your best to answer them and be honest if you do not know something. And never underestimate who has money. Remember Sam Walton, the founder of Wal-Mart, drove a beat up, old pick-up truck. Do not feel too upset if your offer is not accepted. Some simply cannot wrap their heads around private lending. Move on. Others will give you a test run. Use that test run wisely as it could turn into something really great for your business growth.
Kevin Perk is the founder and publisher of Smarterlandlording.com. He is the author of Advice From Experience To New Real Estate Investors. Subscribe to Smarterlandlording here. Contact Kevin here.
