I’ve been utilizing other peoples money to fund my deals for years now. Raising capital has become really easy for me. I’ve been in the business long enough and I have a good reputation so people know that their investment Capitol is safe under my watch. I know where to invest money when it comes to real estate.
This got me thinking, it wasn’t always easy for me in the beginning. I was visiting one of my lenders on May 1 because I had to write him a check and I decided to ask him what he expects from a newbie who wants to borrow money from him to invest in real estate?
He told me there’s four things he expects from a newbie before he’ll consider loaning them money. These four things were perfect as I think any private money lender will expect this from a newbie before they will loan them money.
Here they are for you to study and prepare yourself to approach your potential lender
Lenders want to know your background. What they mean by this is do you have experience in real estate? What do you know about your local markets? Are you handy? Do you know how to work on houses? Are you a numbers guy? Do you know how to crunch numbers for profits? Knowing your background will give lenders a comfort level. The more comfortable they are with you the higher your chances of getting that check.
2) Property Identified
Lenders want to hear you talk the talk. If you are new to this do not worry. Start by visiting properties or viewing deals on realtor.com, zillow.com or craigslist.com. You want to be accustomed to what properties are being listed and sold for in the market you are interested in. When you know your numbers you can spot a deal a mile away! When that great deal hits the market you will be able to tell your lender why it’s an amazing deal. They love this and it increases your chances of getting funded!
3) What is your investment strategy?
Lenders love details! Think about it, they are trusting you with their hard earned investment dollars. It would be nice if you would share with them EXACTLY what you plan on doing with it! If you plan on purchasing a Fix and Flip property you should have a report sharing how long the rehab will take, how much the rehab will cost, who will be doing the rehab. Then your exit strategy: are you selling to a home owner or selling to investors? Will you be selling by owner or using an agent?
Having these details ready for your potential lender greatly increases your chances of them funding your deal!
How’s your credit?
Although hard money lenders & private lenders charge a lot to utilize their money for investments they still would like to know your credit worthiness
But Mike I have horrible credit
No worries if you’ve read my story you know in the early 2000’s I had a failed business, foreclosures and my credit was garbage. What’s interesting about this although I’ve been asked what my credit is I’ve never had to actually disclose it to my lenders.
The best way to avoid having your credit brought up in an interview is to kick ass at these first three steps mentioned above
If you can really show your potential lender you know your stuff and you have a clear plan laid out for them on exactly how their money will be spent, how long it will take to complete the rehab and what their rate of return on their money will be during that time your potential lender may never request your credit because you just knocked their socks off with your investment plan.
You can actually practice this on your drive to work. As crazy as this sounds I’ve done this before. While driving around I would practice my speech out loud over and over again. By doing this you have no choice but to get better each time and you know how to sound like a smooth operator. This will make your lenders extremely comfortable with you and increase your chances of getting that check without disclosing any of your credit.
Try these action steps immediately and follow up with me let me know how you do!