Can You Get Private Money If You Haven’t Done Any Deals Yet?

no experienceI’ve received a great question from Doria from Columbia, MD, and I have to say – this is a question we get quite a bit. Hopefully this answer will help a lot of the newbies out there who are wondering the very same thing.

Doria asks:

“Can you get private money if you’ve never closed a deal?”

My answer to her question is: YES – you can get private money funding, even if you’re brand-spanking new in the business and have never closed a deal.

Do what Brian did…he listened to my advice

One of the followers of my blog, a newbie investor named Brian, told me that he followed my private money getting process, and lined up a private lender for $150,000.

Yep, you read all the zeroes right… and that money covered ALL the expenses of the deal, which included the rehab, marketing, and holding costs.

But Brian’s true story gets better…

This lender then went on to tell Brian that if that first deal went well, he would lend up to $500,000. Bam!

So, as you see here, it can happen. But to say that it’s a common occurrence would be to mislead you. Will it help in getting a private money loan if you have a few deals under your belt? Absolutely.

2014-08-04-brokeAll of us in this business remember what it feels like to be a beginner, probably self-conscious about your lack of experience. However, it’s usually not that big a deal to the lender. Oftentimes, you can present a deal and the subject of whether or not you’re a veteran may never even come up.

If it does, here are a few strategies you can use…

Switch the focus to the deal

If it does come up, I encourage you to simply switch the focus. Turn the focus off of you and onto the deal itself. Always remember that we’re talking about asset-based lending here.

When you meet with a potential lender, tell them that the real estate is their security in the deal.

The property is what they’re investing in – not your experience level.

Make it crystal clear that they’ll have a chance to review any deal you come up with. You’ll pass it by them first and they’ll have a chance to say yes or no before moving forward.

Switch the focus to the mentor

Another technique in switching focus is to explain that you closely follow the instructions of your mentor who has closed dozens (maybe hundreds) of deals and has used millions of dollars of funding – the exact type of funding that the two of you are discussing at the moment.

That answer can help bolster your credibility.

Take a different route

If you’ve tried switching the focus and the process still seems difficult for you, perhaps you should take a different route – such as working with a partner.

Rather than seeking a loan, do a straight-up, 50-50 split of the profits with the person who has the cash funding.

Find a team of experts

powerteamThink about this…

Put yourself in the shoes of the private lender. Ask yourself – what would make you decide to want to work with someone who has no experience?

I often tell beginning investors to surround yourself with a team of experts who have been in the business a while. This might be a Realtor who can work with you to help value the property. It might be an experienced contractor who can give a correct estimate of repairs.

You can have those experienced experts put together the numbers, and then present those to the potential lender. This definitely lends an air of credibility.

There’s no one size fits all

The route to seeking and finding private funding is going to look different for each person because every person is different.

The level of confidence is different, as is the level of knowledge. The way a person makes the potential lender feel will also be different.

Because of all of this, I can’t give one answer that will work for every person. For some new investors it may be that the best plan is to knock out a couple of wholesale deals so that the experience is in place. Or as I mentioned above, shift the focus and that may be enough to help your lender become comfortable loaning you money… or be willing to partner with them 50/50.

Thanks again to Doria for her great question!

Patrick RiddleYour take?

Have you been successful in seeking and finding private money lenders? What worked for you at the outset? I’d love to get your input. Leave your comments below.

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10 Hour Wholesaler

6 Comments

  1. I have read and studied some of your messages and my thought is they are more interested in the deal and what they, the investor, gets out of it and not the wholesaler. The reason you approach a private investor is to offer them a higher rate of return on the investment than what they are getting with the backing of the property.

    • Yes, exactly.

      Hope you’ve been doing well Mary.

      – Patrick

  2. Wa Supper Patrick..trust all is good in the hood…Those are some excellnet tips for newbies…just remember folks…persistence is the key…People(private lenders) dont care how much u know..until they know much you care…Just be you…….trust in GOD & everthing else will fall in place…

    • Hey Marc, all is good on my end 🙂

      Great advice! Love it.

      – Patrick

  3. switch to your mentor, that is the ‘problem’. finding a mentor is a problem around here in Charleston, SC. I have asked for and received nada, I am a ‘tirekicker’ so to speak……..bottom line even attending an REI meeting, talking to and even furnishing some viable leads as a birddog [woof woof]have not been taken seriously. one investor I met was renovating a 10×50 mobile home which I did some painting in,terrible. Anyway, Have yet to find a ‘mentor’ here…………

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