How do you find private lenders? Private lenders are the key to keeping the bucks flowing so you can keep your investment machine chugging along. And amazingly enough, they are incredibly simple to find – if you know where to look. Fortunately for you, I'm about to tell you.
Why Investors Need Private Money
Before I do, let me tell you why you need private money lenders. First and foremost, you will pay less money for your investing dollars. Hard money lenders have their place, but why pay anywhere from 12 -15% plus points if you don't have to? Private money lenders will accept anywhere from a 4 – 10% return on their money.
Private money lenders also allow you to acquire properties without banging your head against lender-imposed limits. Many investors don't know there is a limit to how many mortgages you can have before commercial lenders decide you are too much of a risk. The limit has been as high as ten mortgages and as low as four. Seriously? If you're an investor, a portfolio of 8 – 10 houses is a starting point, not your investment ceiling.
Best of all, private lenders, especially those you have built a strong relationship with, can pull the trigger fast. They know you, they know how you evaluate deals and they can sign a check (or send a wire) without blinking.
How Do You Find Private Lenders
So how do you find these investors? I like to shop close to home. Having private money investors from my local area has a couple of benefits. First, it's easier for them to meet me, see that I'm a real person and take a look at what I've done. It creates a comfort level when someone is handing me money. In a manner of speaking, they know where I live. Another benefit is that their money is close by. Picking up a check or getting money into my title company's escrow account is just easier when everyone is local. Sure, I'll take long distance money, too! But local is a good place to start.
Go online to your county Clerk of Courts office. If you can't access the records online, you're going to have to get your butt down to the Clerk of Courts office. It will be worth the trek, I promise you. It seems like every county is set up a little differently and some are easier to work with than others, but here's the basics:
1. Go into the “Search Records” function. You may need to sign in, click to agree to their terms or jump through some other minor hoop. It's all good.
2. In most of the search forms, you can set the parameters of what you're searching for. In my local database, I can search by last name, document type and/or category and dates. I set my search for “MORTGAGE” records and I set the search dates for the past four years or so. A lot of people were lending money in the run-up but they are not lending money now. In order to save time, I only search for dates after the economy crashed, from about January of 2009 to the present. These people still have money to put out.
3. In some counties, you need to enter a name or the first three letters or a name. Don't let this stop you. I go with common names: Jones, Smith, Harris, Turner, Johnson. I type in the first three letters (or the whole name if it's required).
4. Scan the search results for names. Ninety percent (or more) of your search results will be traditional lenders — banks and known mortgage originators. That's fine. You're looking for the names of individuals or what sounds like a small company.
5. When you find an individual name, click on the document and bring up the mortgage. The amount the private person has loaned is usually on the first page. This gives you an idea of how much money they like to loan. It almost always includes the address of the person loaning the money. Copy it down!
How To Approach A Private Money Lender
I put the names and addresses of private lenders, as well as the amount they have loaned on an Excel spreadsheet. From there, I send out a simple letter, introducing myself as a local real estate investor and telling them a little bit about me, including the fact that I work with private investors. I give them my contact information as well as my website address so they can see what I do. Then I simply ask if they'd like to be informed of any investing opportunities that I come across.
I always follow up with little “touching base” notes – at least every other month. I don't clobber them with a credibility kit right off the bat or press for money right away. Think of it as a dating game with someone you really like and don't want to screw up on. Go slow, don't scare them off and let them see the value of what you do. True players have their own parameters of what they look for in a deal. If you can, meet for coffee and talk about what they like to invest in and what kind of returns they like to see.
There's a FORTUNE sitting in public records – all the money you will ever need for your deals. But if you don't ask, you don't get. Why are you still looking at this page?? Click on over to your local Clerk of Courts site NOW.