Anyone who invests in real estate needs money to do so. Most private individuals go to a bank or lender and take out a mortgage when they want to buy property. However, when you are in the business of real estate investment, finding sources of capital to use for your deals can sometimes become a major undertaking. Because of this, an integral part of any real estate investment company’s business plan should be the continual process of prospecting for private money sources.
As you know, private money is just that – money from private individuals. So, the secret to finding private money real estate investors is to find those people who have money they are willing to loan at a rate which is advantageous for them. Think about those people you come into contact with in your daily life like your dentist, doctor, accountant, etc… Now, think about their options for investing their funds for the future. Many of these options top out at about 6% in interest. Imagine their response to you being able to give them 12% on their money and your being able to do so with the guaranteed backing of collateral property. It is a win-win situation for them to work with you and invest their money with you.
Finding private money for real estate investment requires that you do some prospecting. The way many people start the prospecting process is to approach people they already know well and lay out a potential deal in front of them for their consideration. Suppose for a moment that you have a friend or relative who is saving for retirement and is only getting a rate of 6% on her CDs. Now, suppose you have a property where you can return this same person 12% interest if she loans you the money currently in her CDs and will do so for the next three years. And, just as the bank is insuring her CDs through the FDIC, you can insure her money by securing it to the property as collateral. Who could say no to this scenario?
If you do not have any friends or relatives with investment capital, or you prefer to only do business with strangers, you can place an ad in your local newspaper looking for real estate investors and talk to those people who choose to call you. You can approach any of your local area’s investment groups and realtor groups as well. In addition, you can purchase a list of people in your area who own CDs or other investments, from a reputable list broker, and do a mass mailing to each of these people looking for investment capital.
The ways in which you can prospect for investors is limited only to your own imagination and creativity. However, the most important thing is that you need to prospect for money on a regular basis and you need to keep the private money flowing in your pipeline for when the deals arise. You can’t take advantage of great real estate investment deals if you do not have the money available for you to do so.