Getting Financing For Your Real Estate Deals
As you probably know… I’m going through the process of buying my first home with my wife… I’ve owned 
rental property since I was 21 and in college but it just hasn’t made sense for us to buy a house yet.
So, here’s the deal…
Not bragging at all… but my wife and I have great credit… over 750 for the both of us. But, even for us in today’s market it isn’t all that easy to get financing. Since we’ll be living in this home it looks like we’ll be just fine as far as our home loan goes… but investor loans are a different story.
It’s Nearly Impossible To Get Investment Property Financing
If you’ve tried to finance an investment property, get an equity line on one of your properties, or get a business line of credit from a bank you’ve found out that the banks are tight as heck with their money… and for good reason (hint hint… they’ve been burned on foreclosures recently).
Fannie Mae even changed their lending guidelines to decrease the number of loans one person can have on their credit from 10 to 4 (there’s an easy work around for this though…)… but they also increased the loan prices for investors and made it expensive as heck by adding greater upfront points to the loan based on the LTV of the purchase.
Even at below 70% your still going to be paying at least 1.75% in UPFRONT points… in addition to higher interest rates… that’s if you can qualify. Even if you bring in 20% the new Fannie Mae requirements slap you with a minimum of a 3.75% upfront "points" fee… that adds up.
Here’s an article that came out recently that outlines some of those new Fannie Mae changes.
So, What’s The Solution?
The big boys who have been able to show a long history of success and responsibility (bigger companies with long track records) can still get business lines of credit to help with their businesses… us little guys almost get laughed at if we don’t have a ton of money or assets to place as collatteral (or don’t want to place that as collatteral)… and it’s pretty damn tough to get money from conventional resources (i.e. – banks) for our real estate deals.
The solution?
It’s nothing new… we’ve even told you about it many times and have tried to help you along the way with a 2 hour workshop a couple months back…
… anyhow… you guessed it…
It’s Private Money
Guys and gals, in today’s financial market private money is the single most reliable source of financing right now to fund your deals.
Whether you need $10,000 to fund a rehab (like I am funding as we speak with private money)… or $100,000 to buy a property at 60 cents on the dollar… private money is out there and in my opinion… is easier to get today than it was 5 years ago.
The stock market is in the dumps and people are yanking out their money left and right.
Here’s just a few articles I’ve read recently that show the whole story…
- "Money Continues To Flow Out Of The Stock Markets "
- "Jim Cramer Says It’s "Time To Get Your Money Out Of Stocks! "
Now… a lot of people are looking at the stock market dump as a negative… for real estate investors it’s a positive because this means those people who are taking their money out of the market are looking for a place to put it where it’ll earn a safe yet good return .
And…
Real estate is a great place right now to place that money because we’re seeing some of the best buys in 20 years… and properties are now cashflowing again.
We’re Going To Help You Get Private Money
Okay, the single largest question I’ve been getting the past couple months is "how can I finance my deals? "… I get at least one of those questions a day.
For me, the answer is private money and finding the people with money to partner with or borrow from. That’s it.
So, my buddy (and full-time investor from South Carolina) Patrick Riddle, who’s been able to get over $6 million in private money for his own deals, and I… are putting together some great educational videos to help you get private money.
We’re going to call this video series the "Private Money Blueprint " and… to make it really "fancy like"… I went ahead and made a separate website just for those videos and that content because I know its a "hot button" right now and I think it deserves it’s own space.
So… I just got the first video up today … truthfully it’s not chalk full of actual instructional content (like the rest will be)… it mainly goes over the situation… my own story (I show you my first deal and the actual closing statement that shows how I funded the deal with private money… I’ve never shown this before)… and Patrick goes through some of his deals that he’s closed with private money (including actual HUD-1’s and the checks from the investors).
We thought it would be good to start out giving our background a bit more than we gave on the private money workshop in September… I think you’ll enjoy it… and we’re working on the other videos as I speak (or type… I guess 
.
So, head over and grab the first video … then come back here and start submitting your specific private money questions through the comments section below .
Sound good?
But seriously, come back and start entering your questions … we’re not going to stop until we get you private money for your deals… I’m serious here.
Go watch the video . .. <<<
Then, enter your biggest private money questions below (and we’ll answer them).
Hey, my name is Trevor and I'm the founder of The REI Brain and a real estate investor since the age of 21. Right now, my focus in real estate investing is multi-family income properties and I have plans on moving more into the commercial real estate investment world in 2008 and beyond. 
Hey Guys,
I got an email from a reader asking where to post the questions… go ahead and post them right here in the comments section.
Patrick and I will do our best to answer them… give you resources (I already have some stuff ready for you for next week) etc.
Thanks guys!
- Trevor
Hey guys, first off, thanks for doing this!
This is something most sites are just barely even talking about, I look forward to it!
Basically, my biggest question is how do I go about finding these people who have money? And how do I talk them into investing with me?
Thanks!
Kevin
I watched your private money workshop video last month and it answered a lot of my initial questions.
I guess my question is how can I make these investors feel confidence in me enough to ask them for money?
- Sherrill
I’ve been trying to invest and get private money for over a year and haven’t done any deals yet, but I know there’s money to be made out there.
My question is how long will it take me to get a private money lender, and another question is how do I find a lender if I have already found a great deal to invest in? I’ve missed out on a deal where it was a great deal but I didn’t have the funds to close on it.
Any help to those questions would be great!
Thanks a ton!
Man this could be the tool most investors have been waiting for.
You’re 100% right Trev conventional loans are out. If you can’t get a lone at a FICO score of 755 than that means 99% of us are out and private lending is the way to go.
Question will you be teaching us how to tap into self directed IRA accounts from private investors who want a better return than an IRA or even those with traditional CD’s and savings accounts?
Hey James,
Thanks for the comment man.
I was debating on whether or not to put in a ton of time teaching this… but I now realize that for a ton of people… financing their deals is their #1 stumbling block.
Anyhow, ya… we’re going to make these lessons and resource the tool that you all have been waiting for… it’s going to be some great stuff.
Great question by the way… there are a ton of people out there w/ IRA’s, savings accounts, and CD’s that want higher returns in a safe manner. They’re perfect private lenders… the key is to let them know about the opportunity… answer their questions… and build trust with them.
I myself am not an expert on working w/ IRA’s and that kind of thing… but I do have a friend who is very experienced in this… let me see if I can schedule him for a phone call.
Have a great weekend!
Keep the questions coming guys!
- Trevor
IS there any specific steps you can take to help present to potential private money lenders? How do I market to these people if I don’t have anyone in my family who has thousands of dollars they can lend to me?
Overall, how does a small and new investor find private lenders who will give me money?
Thanks!
Please include me in your next video as I have ordered many books regarding this subject, but no one ever gets down to the actual steps required.
Thanks guys for the info. It’s much appreciated.
I feel like I trust you guys quite a bit because you seem to be real and not those overhyped gurus.
That first video had a little bit about Trevor in it and I’ve gotten to know and trust Trevor over the past month since I’ve been on his list. But I don’t have a clue who Patrick is. What’s his story? How’d he get started?
I always like to hear how people got started because its a bit of inspiration for those of us who are still struggling.
Another question, basically how do I structure these private money loans? What do I charge for interest?
Thanks!
Hi,
Great video! You guys are the best! I am very interested to learn how to put a pool of private capital together to take advantage of an opportunity I have with an asset management company who has portfolios of properties nationwide available on an on going basis.
I need to learn how to structure the investments so that everyone wins, including me.
IF others are interested in JVing with me to purchase these incredibly discounted portfolios please call or write me.
Dave Cullen
AND Group, LLC
andgroupllc@comcast.net
978-360-6525
Thanks for all the great info guys! What paperwork are you using? Is there a mortgage? is it recorded? Are you signing the note personally (if there is one)? Are you pulling comps for the potential investor? Are you taking them on a ‘drive-by’ of the property? What if they are out of state? Have you used non-local investors? How do you structure the payments and terms? do you have to make regular monthly payments?
I’m looking forward to more. This is great information that I haven’t been able to find anywhere else!
Hey David,
Ya, I’m actually recording a little interview with a gal that I know that has put together multiple millions of private money funds into pools for their own properties. I’ll get that to you guys hopefully this week.
Wil… as far as paperwork… I truly don’t have any paperwork myself… I always use an escrow company to close the loans so they create the note, record it with the county, etc. So, all I do is find the lender and negotiate with them… and provide some of them with a disclosure… that’s it… I let the escrow company take care of the rest for me… the lenders appreciate it too.
The best thing to do for your lenders is to create a project package that has financials, an appraisal (most of the time), etc. Basically, what would you yourself need to feel comfortable to write a big check on a property? Make it easy for your investor to get the research done… then ultimately you of course have to leave it up to them to do the due diligence that they feel they need to do.
Payments and terms can be structured in any way you want… I’ll show you a private money loan I’m doing right now for $10,000 that is just added onto the mortgage of a 4 unit building I own… 6% for 24 years.
But, most private money loans will be shorter term and have a higher interest rate (between 9-12%). But, since it’s harder and harder for investors to refinance out of properties to pay off the private money… it makes more and more sense to get private money lenders to lend money and to become partial equity partners in the deal.
I’ll see if I can come up with a video for ya… but Patrick goes over this a bit in the private money workshop we did in September.
Here’s the link:
http://www.thereibrain.com/webinars/workshops/private-money-workshop.html
Keep the questions coming!
- Trevor
Troy,
I saw that you asked a little bit about my story. The second video that Trevor just added to http://www.privatemoneyblueprint.com will fill you in.
If anyone wants to ask me a specific question, go for it. I will be checking back regularly. I look forward to helping you all achieve private money success.
Trevor, great job answering all the questions so far. I’ll be back to help out.
Patrick Riddle
In the interest of full disclosure, before you read the rest of this, I have to tell you I’ve been lucky enough to learn from Patrick for several years. Not just about Private money, which he has been recently coaching me on, but in all aspects of real estate investing.
Why Patrick? Well, first let me say that I strongly believe in standing on the shoulders of giants. I mean, there’s no need for me to repeat the same mistakes others have already learned from. If you subscribe to this philosophy, the only real hurdle then is finding the giants whose shoulders you should stand on.
Patrick is one of those giants. I’ve met a LOT of real estate investors over the years. And most of the investors I’ve met are doing mediocre at best. Therefore, when I went looking for an investor to learn from I was looking for someone who was exceedingly and consistently successful.
When I first met Patrick my perception was of a young kid with a wannabe attitude. That changed fast. The more I got to know him, the more I realized that this “kid” was killing it in real estate. He was buying four, five, sometimes six properties every month. I quickly realized that whatever he was doing I definitely wanted to learn. I was fortunate enough that he was willing to teach me.
I picked Patrick’s brain for many years, and without exception Patrick has given me more nuts-and-bolts usable real estate investing advice than anyone, period. And please consider that last statement in the light of the following: during that same time period I was reading just about every real estate book and attending just about every real estate seminar I could find (to the tune of about $30k per year). Knowing that, you may want to go back and re-read the first sentence of this paragraph.
Patrick not only gave me the techniques I needed to be successful, but he helped me tweak them to fit my business model, or just fix what I screwed up. And he did it with an underlying tone that was always encouraging.
So, here’s my suggestion: IF you are serious about becoming a successful investor, and IF there is any way you can get Patrick to give you real estate investing advice, than I say do whatever it takes to get that advice. Own a car? Sell it. Got a house? Mortgage it. Just get this advice. The payback will be well worth it.
Oh yeah, let me tell you one other thing about Patrick. Real estate investing wasn’t the greatest thing he ever taught me. The single greatest thing Patrick ever taught me was to work on myself first. To be a better person today than I was yesterday. And he taught by example.
Those are the two reasons you can’t go wrong investing time or money with Patrick. He knows his business when it comes to real estate investing, and he always does the right thing. A rare combination in this industry. Oh yeah, here’s a third: you’ll also earn a great friend.
Here’s a comment that I got over at my blog on the first video:
I can not begin to tell you how much this information has helped me. My husband recently became ill and I have been in the real estate brokerage business for over 33 years and the bottom of the market fell out and I am the only provider as of now. I have never had a problem finding the deals but we have no credit and no strong income to do anything but Private money. I did not know where to start and I really had no money to start with but real estate is all that I know. After your fantastic webinar you inspired me to just get busy. I have made a couple of contacts but I have not gotten anyone interested as of yet. The folks I have talked with tell me that they are real concerned about investing in property that may not sell. Now I need your guidance as to what I need to do. I have a property that I must get private money for that I am buying with a partner. Please help us. Thanks
Hey Patrick,
That’s a great question from that gal and something that I think is one of the stumbling blocks that people need to blast through.
Investors need to have their exit strategies mapped out BEFORE they purchase a property… and when you take your property package to the potential lender… you need to make it clear to them on exactly how you plan on paying them back… and when.
If you rely on just one exit strategy… like trying to sell it to a retail buyer… you’re really limiting yourself and I can see why a private lender would be hesitant to invest.
But, if you have 3 exit strategies… all that will put the private lender in a good position… it will be much easier.
Really the key is that you must buy it far enough below market value that you have room to price it to sell. In this type of market you can’t price your house at full market value and expect it to sell fast… buy it right (60-70% FMV)… and in worst case scenario you have to sell the property for 75-80% FMV and make a few bucks.
How you buy will really limit your choice of exit strategies.
And… as a private lender I wouldn’t lend on any property that was bought at more than 70% ARV… maybe even 60% ARV.
So… buy right… thats the real issue here.
- Trevor
Man guys, this stuff is just what I was looking for. Everyone else hints at private money but really doesn’t show how to go about getting it.
Keep the videos coming! I can’t wait to see see the IRA and pooling funds video.
Just wanted to thank you guys for all of your hard work that you’re putting into teaching us this stuff!
The video about using IRA’s cleared up so much for me!
Thanks and if you guys are taking on students I’d love to be one of the first!
Thank you for the instructional videos. I loved the one about IRA’s but am still a bit confused on the whole syndication process.
Also, do you guys train people personally on this process? Do you take on students? If so, I’m kind of cash strapped right now and can’t afford something thats going to cost me 2 grand. Let me know and if you guys do, if you can make it work for those of us who don’t have the cashflow to fork over thousands of bucks. Maybe a payment plan or something.
Well, I guess I’m getting ahead of myself though.
Thanks again,
Juan
Trevor,
Great series and YES I want to know more about this!!!|
Dave Cullen
Trevor:
Great material. Are you going to cover the impact of state and federal securities laws where applicable. I’d like to learn about angel investors and other high net worth individuals who participate by investing in the context of funding (the down payment) through the syndication for a large multi-unit apartment building (100 or more units in emerging markets). I only know of one person out there who teaches this and at this stage of my investing, I cannot afford his bootcamps plus airfare, hotels etc. Keep up the exceptional good work.
Barry
So how do you become SEC compliant?
That’s what I am asking about James. I know there are some classes of investors who are exempt but you need to file (I think) for an exemption with your state securities agency and sometimes with the SEC..I believe there are some specific rules that apply to how you can or cannot contact people who are potential private investors who you do not know. I want the same information that you are asking about. All I know is that compliance is not that complicated BUT your failure to comply can be serious with regard to enforcement issues where compliance is required and it is not done. I hope Trevor and Patrick will cover this in some future session to the extent they believe it is as important as I believe it is.
Great information Trevor. I am anxious to find out EXACTLY what I can say or Not say on a direct email or mail piece.
do you have a simple template that I can add to for my own deals.
Where is the best place to purchase names or buy IRA and 401K owners?
I am in northern california and in silicon valley they are usually funding techie stuff, or single family, whereas I am doing MH Psrks and
Self Storage projects.
I would really like to continue hearing these kinds of tele-seminars.
you do them very well and easy to follow.
thanks June
Hey guys! Just thought I would share a couple comments that I got over on my blog for video 3.
“Great, Just the kick in the pants I need to put me out where I need to be. Thanks for caring.” – fsboladysc
“Patrick, you straight up rock! I would have paid big bucks for what you have provided for free. I hope I can catch up with you for additional mentoring.” – Kevin Donovan
Hey Barry and James,
Thanks for the comments guys.
Yes, SEC compliance is pretty darn important… and not that difficult. In my state (Oregon) if you are taking private money loans “1 to 1″… meaning you have one lender for one deal… not multiple lenders to a deal… and you are not actually marketing… you don’t have to register or anything. They define marketing as anything other than personal networking basically… even a website.
But, in Oregon (and I’m sure many other states) one particular private lender can’t lend more than “x” # of loans in a year… or they’re considered a mortgage lender… and have to be licensed. In Oregon it’s something like 10 loans in a year (or at a time… I’ll have to refresh my mind to make sure)… which 90% of your lenders won’t touch.
In Oregon (and many other states are this way too)… once you start to take on multiple lenders for a deal… they require you to get “registered” w/ the state securities office… but in Oregon it’s only a few hundred bucks… then once you’re registered you can do any type of marketing at all… of course as long as the proper disclosures are on your marketing.
It would be 45 hours of video if I were to go through every state and their regulations… since all states are slightly different… which of course wouldn’t be a very effective use of my time since I have 2 businesses to run.
But… like I mentioned in Video 5, Patrick and I are going to be taking on a few students (between 10 and 20… we’re not sure yet) here soon and we can then do state specific stuff w/ them since there’s less people involved… and that would make it make more sense for Patrick and I to take time away from our businesses to put in a big time effort.
No matter how much I love giving away as much content and instruction for free (which I do… more investors should “pay it forward” like this)… in these indepth topics… it makes sense to create a very high value and highly actionable coaching program… and teach a few people more closely.
Anyhow, Barry and James… SEC stuff is pretty easy… just need to find the right resources and stick w/ them. But, as long as you’re recruiting through word of mouth and networking… you don’t have much to worry about w/ the SEC stuff… and truthfully it’s much easier to get private money by networking than it is to “cold call” or direct mail someone who you have no affiliation with… but there are some very effective ways to find private money lenders through other means other than networking.
– Trevor
Hey Guys:
I watched all your videos and was in awe. I’ve been in commercial lending for years and it never crossed my mind to do something like this. I heard in one of your videos that you were going to make some slides or something like that available for establishing credibility during presentations or something like that. I looked for them high and low and didn’t see them anywhere. Did I misconstrue something or were they only available for a limited time? Please advise and know that what you’re creating here is such a huge avalanche of knowledge that will lead you both down a path to limitless prosperity. Lead with the seed, which you are doing, by helping new investors learn no matter what their knowledge or experience. This has truly changed the way I look at things and now the things I look at have changed monumentally for the better.
Thanks
JR Keeling
Hey Jr,
I apologize about the huge delay in getting back to you….
I haven’t had access to my email for a few days and
I’m way backed up.
Anyhow, I don’t remember what I said in the video… but
I went ahead and put up a page w/ a 2 hour training video
that we just did in our Private Money Blueprint coaching
program for our students.
Here’s the link:
It goes over building credibility and presenting to lenders…
some great training in there for ya.
Enjoy
- Trevor
12.28.08
Patrick or Terry,
Heys, I thinks its great that you are giving out this free information. I am impressed to say the least. I have a host of questions and some of them have been answer through your posted questions and answer segment of your website. However, and maybe I have missed it, but I thought I heard someone ask about a presentation that you were giving and allowing people to download. Is this so and where can I down load this power point presentation? Or can someone send it to me? I have other questions, but 1st, I need to go through the videos that were sent. Thank you for your answers in advance. I will be in touch.
Stephen Stegall Jr.
515202.7563
Hey Stephen,
Thanks for the comments man! Hey, I was once just getting started in real estate at one point… and now I’m just paying it forward with as much free info on real estate investing as I can… with a few top quality paid products mixed in to pay the bills for the site.
To get the powerpoint presentation head over to Patricks blog:
http://www.mustknowinvesting.com/freestuff.html
You can opt in and download the stuff there.
Let me know if you have any other questions.
Chat soon,
- Trevor
According to Thomas Kish at the URL above: (I quote)
“Does Private Lending sound like a good deal to you?
- Private Lending is expensive.
- Private Lending is harder to get than you think.
- Private Lending is not legal in some cases.
- Private Lending is a lose/win deal in most cases.
- Private Lending takes a long time and has plenty of paperwork required.
- Private Lending is just BAD.
So, why would you want to use Private Lending?
I have created a better alternative to the Private Lending sources most people turn to just because they don’t know other places to get money.”
The alternative being (Unsecured)Business Lines of Credit. He seems to make a good case to me. Do you have a counterpoint? When does it make sense to use private lending vs. business lines of credit?
Alton,
It seems to me that Thomas Kish says what he does about private lending in order to sell more of his “business credit” courses.
On the same page where you cut and pasted the info above, he said:
“Private Lending interest rates range from 17% to 29%.”
and “Private Lenders also charge “points.””
I don’t know what private lenders he’s talking about, but Trevor and I have gotten private loans between 6% and 10% consistently.
I have never paid points to a private lender before either. Most of my private lenders don’t even know what points are.
Mr. Kish must be talking about something completely different. Maybe he’s talking about some kind of institutional “private lenders.”
We’re talking about going out and getting funds from everyday people who want to make a better return on their investment dollars backed by real estate . . . better return meaning 6 to 10%.