Private Money 101: A Crash Course in Private Money

Before we dive right in, answer these questions for me …

= > “Are you frustrated because you can’t get your hands on the cash you need for your real estate deals?”

= > “Are you scared to make an offer for fear that it will get accepted?”

= > “Have you ever lost a great deal because you didn’t have cash to close it?”

= > “Is a lack of financing killing your real estate investing dreams?”

If you answered “yes,” to any of the questions above, then private money may be THE solution for you.

To find out, let’s take a quick crash course in private money … aka Private Money 101.

What is private money?

Private money is cash from an individual that is lent to you, the real estate investor, rather than being invested traditionally through stocks, bonds, mutual funds. When you think about private money, think investment funds from an individual … any individual.

Is private money the same as hard money?

Far from it!

Hard money lenders finance deals for real estate investors as a business. They lend to investors based on the property, not necessarily based on the person. The hard money lender dictates the terms of the deal to you, the investor.

A typical hard money loan has high interest, points, and is short term. For instance, I purchased my second deal with a hard money loan. I was charged 15% interest, five points (or 5% of the loan balance), and had a term of six months to repay the loan in full.

Do you see why they call it “hard” money?

On the other hand, with private money, you dictate the terms of the loan to your private money lender. Based on the deal and your business model, you offer terms that suit your needs and provide a good return for your private lender. A typical private money loan could have 6% to 10% interest, no points, and a term that suits your exit strategy.

What type of properties can you buy with private money?

The primary niche for my real estate investing business is single family homes. But, single family homes are not the only type of property you can buy with private money.

Trevor only buys apartment buildings. He has been investing for several years now and has accumulated a nice portfolio. Each property cash flows well, is managed by a professional property management company, and is in or near his local market.

And how do you think he finances every one of his purchases?

You guessed it … Private Money!

Any great real estate investing deal can be financed with private money; it doesn’t matter if it is a house, condo, townhouse, apartment building, skyscraper, or beach front home.

Do you have to do lender luncheons to get private money?

One of the popular methods taught to get private money is to host a lender luncheon. You would be required to rent a facility, advertise to fill the room, and you would present your private lending program in front of the audience. While I believe this to be a good strategy for some, hosting a lender luncheon is not a viable strategy for most.

Why you might ask?

The number one fear in our country is public speaking. And you know what is number two … death! Most people would rather die that speak in front of an audience. Even if it was easy to get private money by hosting a lender luncheon, the majority of people would not do it.

So the question still remains, “Are lender luncheons required to get private money?”

Luckily for you, the answer is “no.”

I actually found that it is easier to get private money by presenting your investment program to prospects one on one. Plus, you don’t have to spend money to rent a room at a restaurant or hotel, pay for marketing costs, deal with the anxiety of presenting in front of an audience, etc. etc.

What types of people are the best private money prospects?

The first type is people who know and trust you. This could be a family member, long time friend, neighbor, someone from church or school . . . really anyone that you have built a long term relationship with could be a good source for private money.

The second is people who know a good deal when they see one. Anyone who works in a field related to the real estate industry could fit in this category. Examples would be real estate agents, mortgage brokers, bankers, appraisers, home inspectors, attorneys, accountants.

And yet another type most likely to lend to you is the best source of all . . . people who know someone who has invested with you. Or, in other words, referrals! Once you get your private lender base established, ask them who they know that would also like to make a good solid rate of return backed by real estate.

Would my local real estate investing association (REIA) be a good place to find private money?

Yes, it would!

REIA meetings are filled with people who have heard real estate investing is lucrative, want to make money doing it, but do not have the time, energy, motivation, or know how to do it themselves. That’s where your private lending program comes in …

You offer a hands off real estate investment with a good return. Your private lender gets to “invest” in real estate without having to deal with the hassles that come with owning property like repairs, managing contractors, dealing with tenants, and other general property management duties. All they have to do is stroke you a check.

People who attend REIA meetings are already sold on real estate investing, all you have to do is sell them on lending against one of your deals.

How do you convince someone to lend you private money?

You don’t!

That is coming from the wrong mindset. You’re not out to “convince” anyone to lend money to you. Your goal is to educate people about your investment opportunities. If someone is interested, great. If someone is not, next.

Class adjourned. That’s it for your crash course, Private Money 101.

If you have any questions, comments, or additional tips, throw ‘em in the comment area.

Happy Private Money Getting!

- Patrick & Trevor

Why Private Lenders Say “No” And What To Do About It

So, you’re meeting w/ a private money lending prospect. Let’s call him Joe Lender.

You find out that Joe is currently getting a 3% return on his investments. You offer him 6%… and he says “No.”

Why would he say “No” when he could DOUBLE his current return by simply lending you private money?

And more importantly, how do you get Joe to change his mind?

Watch the video below to learn how…

Alrighty, time to take action on what you’ve learned… because action is the big differentiator between success and failure.

… and don’t take my word for it. They all agree.

“Action is the real measure of intelligence.” – Napoleon Hill

“Everything you want is out there waiting for you…Everything you want also wants you. But you have to take action to get it.” – Jules Renard

“The path to success is to take massive, determined action.” – Tony Robbins

Happy Private Money Getting!

- Patrick

… aka P-Rid

P.S. – Be a giver. Leave a comment before you go and give your feedback, opinion, thanks, whatever comes to mind. We LOVE hearing from you guys and gals

How to Save Time, Make More Money, and Have More Fun

You’re About to Discover…

9 time-saving, money-making tips to help you get more done in less time… so you can have more fun and make more money.

How many of you like that concept?

Well, that’s EXACTLY what will happen when you implement these tips.

I’ve borrowed many of these from Dan Kennedy and his phenomenal book, No BS Time Management for Entrepreneurs. Get the book, consume it, live it.

Watch the tutorial below now…

3 High Impact Places to Get Private Money

Let’s face it …

Some places are better (and easier) to get private money than others.

So, you may be thinking, “what are the best highest impact places to easily get private money?”

In a moment, I’m gonna share 3 of these places with you in a video I just shot for ya. .

So, get out your pen and pad because class is in session. Prepare to get schooled.

3 HIGH IMPACT Places to Get Private Money Now

Watch the video NOW!

So, now for your homework …

Pick out 1 of these places and GO! Set a date for when and do it. Action is the key here.

So, networking is a GREAT way to get private money. And is the primary way that I’ve gotten most of my private money ($6 million plus).

But, as I mentioned to you at the end of the video …

How many of you want to get private money without networking?

How many of you don’t have family and friends with extra money to fund your real estate deals?

If that’s you, we’ve got somethin’ for you too.

So, keep your eye out soon for a brank spankin’ new in-depth presentation on an old (but little known) private money getting method that we’ve perfected over the last 8 months.

You’re gonna LOVE this!

Talk soon,

Patrick

P.S. – What other spots have you found to be HIGH IMPACT places to get private money? Be a giver. Share ‘em in the comment area.

P-Rid’s Private Money Millions Series: Private Money on a Silver Platter

Buenos dias fellow private money getters.

I’m coming at ya with more from my Private Money Millions Series (have you checked out Part 1 yet, “How to Explode Your Private Lending Program w/ a Newsletter” … if not, do that first) …

Referrals are like getting private money handed to you on a silver platter and are extremely POWERFUL. Getting referrals puts you on the fast track to unlimited funds for your deals. How?

Let me explain …

To sell anyone anything (in our case, selling a private money prospect on the idea of lending us their investment funds), there is typically a process of converting a prospect’s mindset from unmotivated and skeptical to a motivated buying mindset … let’s call it the “buying process”.

A cold prospect – someone that you do not know nor have any relationship with – begins unmotivated and skeptical. The process of converting them over to a client is MUCH more difficult than say a warm prospect or referral because you start with absolutely zero rapport, credibility, and trust.

A warm prospect – someone you know and have a relationship with – starts further along the “buying process” than a cold prospect. There is already some rapport, credibility, and/or trust inherent in the situation since you’re not Joe Blow off the street who they’ve never heard of.

Warm prospects are the easiest place to start in your private money getting efforts, and, once you get going, getting referrals literally opens up the flood gates of private money to your business.

One of the big reasons why is that the rapport, credibility, and trust that the referral has in the referrer is transferred from the referrer to you and your private lending program. Thus, eliminating in many cases the skeptical mindset that keeps people from lending to you or even meeting with you in the first place.

So, your referred prospects come to you as far along in the “buying process” that the rapport, credibility, and trust (that was transferred over to you) takes them. I’ve had private money referrals where all I did was show up to have a check handed to me. No presentation, no questions, no objections.

Now that’s the POWER of a referral!

So, the next question would be …

How do I Ask For and Get Private Money Lender Referrals?

There are two specific times in the private money getting process that I like to ask for referrals. Below, I’m gonna tell you when to ask and exactly what to say … I’m gonna give you exact scripts that you can immediately “plug and play” into your business.

1. Ask for referrals once you’ve presented your Private Lending PowerPoint presentation, followed up with the prospect with several lending opportunities, and they still haven’t jumped on a deal with ya.

At this point, you’ve established a relationship with the private money prospect, BUT, for whatever reason, the prospect hasn’t jumped on a deal.

Here’s what you want to do …

After you pass the next deal by the prospect, if they say, “No thanks,” say …

“Well, I understand. Even though this is a great investment opportunity, I know that it’s not right for everybody.

Would you even like for me to continue contacting you with these opportunities?

(if yes) … Ok, then it’s obvious <Insert Prospect’s First Name> that you understand why our lending program makes sense, why it makes sense to invest with us …

I’m not sure if this is you, but … who do you know that may be interested in an opportunity like this? … you know, a great investment opportunity …

(at this point, specify how many referrals you want and name off any groups, organizations, etc that you know the prospect is affiliated with)

<Insert Prospect’s First Name> let’s see if we can list 3 people if … that’s ok with you … people from your church or neighborhood, people that you work with or who attend Rotary with you?”

And then, pick up your pen, look down, and SHUT UP.

No matter how long the silence. Do not say a word.

2. Ask for referrals once you’ve borrowed some dinero from a private lender AND you’ve either made several interest payments to them or you’ve paid them off in full.

Depending on how you structure your private money loans, it will depend on how soon after signing up a new lender you should ask for referrals.

Personally, I do not like to ask a new private lender for referrals until they’ve seen actual results, until they’ve received interest payments or been cashed out in full (if the interest accrued until the loan was paid in full).

So, imagine having a private lender who has been in your program long enough to see and feel some results.

Call ‘em on the teléfono (yep, just added another word to my Spanish repertoire) and say this …

“Hey <Insert Private Lender First Name>, this is <Your Name>, did I catch you at a bad time?

(if no) Great. Well, I wanted to ask you a few quick questions about your experience with our investment program. Would that be ok with you?

Thanks. I appreciate it.

First off, how has your experience investing with us gone so far?

(if their experience has been enjoyable/positive, focus on asking additional questions that get them talking about those benefits and then say …)

I’m glad to hear that <Insert Private Lender First Name>.

Well, who else do you know that may be interested in an opportunity like this? … someone who would also enjoy <Insert the Benefits the Prospect Mentioned>  …

(specify how many referrals you want and name off any groups, organizations, etc that you know the prospect is affiliated with)

Let’s see if we can list 3 people if … that’s ok with you … people from your church or neighborhood, people that you work with or who attend Rotary with you?”

And then, you know the drill …

Pick up your pen, look down, and SHUT UP … (or in Spanish) … Cierra La Boca!

No matter how long the silence. Do not say a word.

With your new list of private lending prospects, strike while the irons hot! Set aside time the next day to set up the formal appointment.

Hasta luego,

~ P-Rid

P.S. – Stay tuned for more action in the Private Money Millions series … Part 3 “The Secret Sauce to Get to ‘YES!’” coming soon.

Meet the Private Money Blueprint Team

Together in a live setting for the first time EVER … meet the PMBP Team!

Our Getting the Money Bootcamp was an absolute slam dunk (that’s what brought us from our respective sides of the country together).

Check out some of the feedback from attendees:

“The content here was AMAZING – specific, understandable and immediately usable. Thank you!” – Bernadette Davis

“The Getting the Money Bootcamp was not only packed with top-notch, excellent content, but the quality and caliber of attendees made for one of the best networking opportunities I’ve ever experienced. Job well done Patrick, Trevor and Susan!” –Jeremy Crutchfield

“As always, you delivered much more than expected.” — Les Bick

“This is the best real estate seminar I have ever attended.” — Steven Thronbrugh

“This is one of the best seminars I have been to, and I’ve been to a lot! Thank you for 3 great days!” — Kevin Guttman

“Extremely informative and intense 3 day event that will have a surefire impact on any Real Estate Entrepreneur regardless of experience.” — Jamie Matheny

“An outstanding experience that will educate and further the business results of all who attend. Also, the best networking event I have ever experienced.” — Thom Paterson

“Awesome! Demystified those sexy syndications and hedge funds. Thank you! Better than anticipated!” — Denise Eccher

“The best hands down real estate event I have attended. Packed with content, real people who are accessible and truly want us to succeed. This ROCKED!” — Carlton Linder

Happy Private Money Getting!

- Patrick, Trevor, & Tim

Real Estate “Shadow Inventory” Lurking in our Midst……

by Tim Krulia – Private Money Blueprint CFO

As part of our quest here at PMBP to give you the single best resource on the financial aspects of growing your real estate investing business (aka, we help people find private money quickly, easily, and abundantly)… here’s an article I found that explains the different fluctuations in today’s market and why it’s going to struggle again before getting better…

Four great topics are discussed in this article:
1) Post tax credit prognosis
2) 4 strong negatives dragging on the market
3) What the heck is Detroit doing!?!?!
4) “Shadow Inventory”  Dun, dun, dun!!!

Two friends of mine (newlyweds) closed on their first house on Monday.  They were super stressed out to make sure that they had the house under contract and closed by the specified cut-off dates of the tax credit policy.  They are perfect examples of folks who got up off their behinds and bought now rather than later because of the tax credit expiring.  They had plans to buy a house sometime in the next year or so but jumped now for the $.

Real Estate Market Hangover Effect

The author of this week’s article hits the nail on the head when saying that the tax credit’s effect has “borrowed buyers” from later months and now it’s time for the hangover effect.  Meaning, the supply of buyers was potentially pre-maturely depleted a good bit from our government’s incentive plans leaving the next few months or so to suffer from the reduction of supply of buyers.

The author gives 4 great reasons why the market (although had a great recent short term – thank you tax credit boost!!) is going to start to struggle again.  During the early 2000’s refi-boom, equity in houses was leveraged to the hilt with high LTV and CLTV loans.  When I was originating mortgages, it seemed like everyone and their mother either bought their houses with 0% down payment or opened a second mortgage to super high CLTVs.(i.e. only leaving a small amount of equity in their homes).

In the past few years as home prices fell, many Americans had to stand by and watch as the values of their houses fell below the amounts they owed for the house.  These underwater swimmers are what the author is referring to in the article.  It makes total sense what the author is concerned about and the remedy (well one anyway) is appreciation.  If there is enough equity in a house, it can just be sold if the owner loses their jobs, moves, has a divorce, etc.  If a house is underwater, the number of choices is limited as to what the owner can do and well, we’ve seen that foreclosure has been the poison of choice for the masses the past few years.

Detroit Michigan Real Estate Being Demolished

Detroit, Michigan, ouch……sorry man.  Even as a loyal Ohio born and bred Buckeye it makes me feel awful for what’s going on up there.  It’s just too bad that all those houses might just be destroyed.  Coming from a background of personally overseeing about 50+ real estate rehab projects (and seeing first hand what can be done to bring a house back to life & how awesome that really is to watch), I wish there could have been a tax base in place from somewhere to commission thousands of out of work contractors in the Mid-West to rehab these houses & bring them back to life.  Maybe these neighborhoods have really got into such bad condition that this is really the best route to take.  After watching the video in the article, I sure wouldn’t want to be talking a stroll though some of those neighborhoods at night……or even in the daylight for that mater!

Last, but certainly not least, “Shadow Inventory.”  What a great name for these houses!  I don’t know if the author made the name up for this article or what, but it’s catchy nonetheless.  Ok, but what the heck is the author talking about?  Basically, there are lots of home owners that want to sell their houses, but have decided that they will just stick it out until the housing market comes back first before putting their property up for sale.  Well, logic would lead one to believe that as this lull in the real estate market continues grow in time, there is probably some relatively similar proportional growth of home owners that are falling into this category.

Let’s just say that IF all the markets were doing great again (employment, stocks, real estate, foreign trade, etc.); all the people that wanted to sell their houses would put them on the market and try to get a good sales price.  The problem is simply a supply and demand issue.  Over the past few years the supply has been so much greater than demand that it became a main driver of the prices of homes depreciating in value.

If a huge number of home owners are waiting for a rebound in the real estate market to sell their homes, as soon as they hear that the markets are rebounding it’s a very real possibility that a ton of houses will slam onto the market thus pressuring depreciation again.  The author of the article makes note that if these “Shadow Inventory” homes keep popping onto the market every time things start to look a little better, the supply increase from shadow inventory will pressure the market negatively again and again.  I hadn’t thought of that segment of the market like that before but my parents fit that description to a T.  They are baby-boomers. I wonder how many others in that cohort are standing in the same shoes as my parents.  If it’s a significant number, as I’m afraid it may be, that’s a BIG hindrance on any substantial short-term recovery of the real estate market!

It’s Go Time for the US Economy Again!

by Tim Krulia – Private Money Blueprint CFO

As part of our quest here at PMBP to give you the single best resource on the financial aspects of growing your real estate investing business (aka, we help people find private money quickly, easily, and abundantly)… here are some stats I found that helps explain the economic recovery…

If you’ve been following my little weekly article updates the past few months, you’ve read about how I think we as an economy have past our worst days a while ago. The leading indicator is certainly in my mind still the unemployment rate but other contributing factors make me feel stronger and stronger that we’ve bottomed out and are on the up swing. Check out the stock markets:

http://www.nasdaq.com/aspx/chartingbasics.aspx?symbol=IXIC&selected=IXIC

New York Stock Exchange – Last 12 months:

http://www.nasdaq.com/aspx/chartingbasics.aspx?symbol=NYA&selected=NYA

Heck the Dow hasn’t been this high since before it started taking a dive before the 2008 presidential election.  Some say that you can look at the markets and they will tell you where the economy is headed six months or so in the future.  If that’s a good rule of thumb to go by, then we’re in for a good ride for the rest of the year!

Let’s take a peek into the mortgage market.  Interest rates for lending are incredibly low.  The average 30 year fixed conforming mortgage rate is averaging 5.14% this week.  Historically, they say that anything under 8% is good.  These rates are basically the same as back in the huge refinance boom in the early 2000’s.  These great rates may translate into lower interest payment requirements by your private money lenders too.  You could say, “Well, if the banks are only getting 5% for their borrowed funds and I can offer you 8%, that’s pretty good, isn’t it?”

Heck, there are little stories of hope and prosperity popping up all over the place now.  Here’s one that I though was pretty cool.  Florida, arguably one of the hardest hit states from the real estate bust is starting to show signs of rejuvenated real estate life.  Check out this video.

Comments spoken in the video by the builder’s executive includes:  
“Push of 1st time buyers & move up buyers,” “Picking up,” “People are coming down from other parts of the country again,” (meaning – they are seeing home buyers relocating to Florida again which they said hasn’t been the case since a few years ago), “Increased growth.”

Increased construction does translate to increased jobs and thus lower unemployment.  It also shows that there is new life getting breathed back into the real estate market right now!

Here’s our updated unemployment rate chart with March included.

As you can see, our actual rate is holding below the 270 moving average again this month and the Unemployment rate had another steady month holding at 9.7%.  It’s true it didn’t come down this past month vs. Feb. & Jan., but it didn’t increase either.  This marks 5 straight months without the unemployment rate increasing.  We haven’t had that happen since late 2006!  Any month now, let’s expect to see it start ticking downward.  We’re all hungry to read about real economic growth and just wait till the media gets smart to that fact.  They’ll start reporting all the good that’s sprouting in the economy and the avalanche will start!  Who wants to bet me on it?

First Foreclosure and Now a HUGE Tax Burden! What’s Next?

by Tim Krulia – Private Money Blueprint CFO

As part of our quest here at PMBP to give you the single best resource on the financial aspects of growing your real estate investing business (aka, we help people find private money quickly, easily, and abundantly)… here’s an article I found that helps explain why forgiven debt is considered income and taxed accordingly…

This article is great because it gives a clear explanation of some of the ways that the IRS does and doesn’t forgive tax liabilities that can come from foreclosures and short sales.  Since we are in the real estate world, I think it’s great to at least be knowledgeable about some of the tax laws that are out there affecting real estate.  After reading this article, when you’re talking to a client, friend, customer, etc. and the topic comes up over whether or not someone is going to get a big tax debt from their foreclosure or short sale, you’ll have something intelligent to tell them.

The article’s author did a great job listing 4 big exceptions to the rule of the IRS allowing a lender’s forgiveness of debt not to be considered taxable income.  He also mentions that even if an individual does unfortunately fall into one of the 4 categories where the tax liability isn’t erased, that he/ she could still get off the hook so to speak.  One route mentioned was bankruptcy.  That’s an “ouchy” one that can hopefully be avoided.

The other one he mentions is insolvency.  Insolvency, as I understand it, basically is just someone who can’t meet their debt obligations.  I know that this is a better fit question for an experienced CPA or tax attorney to determine who is or isn’t legitimately insolvent per the IRS, but wouldn’t just about anyone who had to let their house go to short sale or foreclosure do so because they couldn’t meet their debt obligations?  It sounds like there’s a lot of grey area in there, and if you’re talking to someone who is faced with a possible big tax debt from losing a house it may be nice of you to tell them to dig into it a bit before giving up and accepting the nasty tax debt.

Here’s something else that of course is specific to each individual’s situation and again, definitely something that an experienced CPA or tax attorney should counsel someone on (and I’m not either one), but I would suspect that there is one other BIG way erase a bundle of the tax debt of forgiven debt that has to be considered as income in the eyes of the IRS.  Follow me here…

It seems like most investors have a business that they run and it seems like most are legally structured as LLC’s, right?  Since an LLC is a flow though entity for taxation, wouldn’t an investor be able to show the loss on their books for the difference between where they bought the property and “sold” it?  I’d assume, yes.  If so, that’s pretty great because let’s say someone lost their property to a short sale for example, and the lender ended up loosing say $50,000 from all the chaos.  If you’re situation falls into one of the 4 criteria that the IRS won’t let you off the hook reporting that as income, you’ve just added $50,000 to your adjusted gross income (yuck!).  If the house took a loss of let’s say $40,000 from where you bought it to where you sold it, then that should be a write off, right?  If so, the taxable income would only be $10K!

Maybe I’m making this sound too easy in my head, but it seems pretty obvious to me.  At least I’d pose the question to an experienced CPA or tax attorney.  It could be a pretty darn clean and easy way to eliminate what could be an ugly tax bill as the article discussed.  Anyone know someone who’s been faced with this situation and how it worked out for them on their taxes?

Credit Card Reform March 2010

by Tim Krulia – Private Money Blueprint CFO

As part of our quest here at PMBP to give you the single best resource on the financial aspects of growing your real estate investing business (aka, we help people find private money quickly, easily, and abundantly)… here’s an article I found that helps explain the recent credit card reform legislation…

Author Martha C. White does a great job of laying out some of the changes that new, “virtually guaranteed” (cough cough….BS…..cough cough) credit card reform legislation that Congress is working on at the present time.

I really hope that Congress can start passing more than just gas because it sounds like this Credit Card reform bill could be really great for the country! The existence of “universal default” practices, bombarding college campuses with credit card salesman, misleading teaser rates or anything that can make a credit card interest rate spike though the roof for one late payment is all pretty rotten if you ask me. It sounds like President Obama and Congress are trying to work toward righting a bundle of the wrongs in our credit card world with this new reform jazz they’ve got cookin’.

I suppose it isn’t material to Private Money Recruiters how all this credit card business shakes out because our business plans have a different focus when it comes to debt management. For example, if we’re late on a payment to one of our private money investors, more times than not it was just an oversight; so we quickly overnight them the money and we all go about our business like normal sophisticated humans.

The credit card companies seem to have got to a point where they are like sharks and as soon as they smell blood they want to rip their borrowers to shreds! Heck, even if Congress agrees to something for a change and the bill goes though, with private money as an abundantly available alternative, who in their right mind would want to go the credit card route anyway?

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