Are You Asking the Right Questions to Borrow Private Money?

The most effective strategy to borrow private money is to ask your prospect the right questions. Questions that elicit motivation, questions that uncover goals, questions that make the prospect imagine themselves enjoying and benefiting from your investment program.

When you borrow private money, here are 5 questions to ask prospects . . .

(Quick Tip: Make sure to write down everything a prospect tells you when you’re going through these questions. This is valuable info!)

1) What experience do you have investing?

Find out if they are or have invested in CDs, mutual funds, bonds, stocks, real estate, race horses, or gold. This will help you get a good picture of the type of investor you’re dealing with, their expectations, how knowledgeable they are with investments, etc.

If they have any experience investing in real estate, you want to know the details. What did they like? What did they dislike?

The prospect’s answer will indicate whether they primarily move away from pain (losing money or earning meager returns) or towards pleasure (making more money/better returns/financial freedom). Note whether they move away from pain or towards pleasure. You will present your investment opportunity to them based on this information.

2) Are you happy with the performance of your investments (investment portfolio)?

Whether they are happy with it or not, you ask the same question next . . . “What average rate of return have you been getting from your investments?”

At this point, if they tell you a 20% annualized return, you can let them know it was nice talking with them and move onto the next prospect. You just saved yourself some time.

Let’s say the prospect said he or she was earning a 6% return on x-investment. At the end of your presentation, you could say something like, “Well, I’m not sure if we can do this or not but . . . what if we could offer you a 8% annualized return backed by real estate . . . would that be something that might work for you?”

3) Whether or not our program is a fit, is it important that you find the right investment opportunity soon?

If they say “no,” this may be a good person to add to your follow up list. You could also say something like this to them, “Sooooo if the money stayed in x-investment earning x% for say another 6 to 12 months, you would be fine with that?” Or, “If your money just sits there earning you nothing for x-time, you’re ok with that?”

If they say it’s important to find an investment soon, you have a green light to continue moving forward towards turning them into a private lender.

4) Are you more interested in making a quick buck or building wealth?

This is another way of asking if the prospect is interested in a short or long term investment. We would prefer that the person invest long term. So by saying “quick buck,” we’re already putting a negative connotation around that idea. The longer term you can negotiate, the better.

If you find out the prospect just wants to make a quick buck, it may be best to move on.

5) What would the right investment provide for you?

This question is key to get the prospect visualizing a positive experience with your investment opportunity. And we’re not even referencing our investment.

Get your prospect to imagine retiring one day with complete financial security, going on that dream family vacation, feeling safe and secure and your prospect will associate those feelings with your investment program.

Remember, borrowing private money is all about asking good questions. So ask good questions and then keep your mouth shut. The more you learn about your prospect, the better the chance of converting them into a private money lender.

- Patrick and Trevor

4 Types of People Most Likely to Lend You Private Money

1. People That Know and Trust You

Credibility that you’ve cultivated through personal relationships is the best place to start when seeking private investors for your real estate deals.

Friends, family, neighbors, work colleagues, people from church, or really anyone that you have built a long term relationship with are good potential prospects. These are the people that regardless of whether or not they have interest or have available funds to invest will be glad to hear you out and give you constructive feedback.

And don’t be too quick to judge someone’s ability to invest with you. That will cost you big if you do. Set up the appointment and present your investment program. Even if they never invest with you, you got some practice presenting to them, you planted another seed, and they may refer someone to you that does have the interest and available funds to get started in your program today.

2. People That Know a Good Deal When They See One

OK, who would fall into this category? . . . anyone that is a real estate related industry will most likely know a good deal when they see one. Seek to network with real estate agents, mortgage brokers, appraisers, attorneys, accountants, home inspectors, bankers, title researchers, other real estate investors, etc.

If you contract a killer deal and show someone that knows what they’re looking at, it’s only a matter of time before you have it financed.

Practice your 30 second commercial, set up the formal appointment, and present your private lending program.

3. People That Know People That Have Invested With You

Yes, I’m talking about referrals. These people have already been presold by someone else that has experience investing with you. Nothing more powerful than that!

Once you sign up a couple private lenders on your team, ask them who they know that may be interested in the program. You can also offer a referral fee or “marketing” fee to get people excited about referring others.

4) People that Are Self Employed or Own businesses

Many of my private lenders are in commission based jobs where they get paid based on results or own businesses themselves.

These people are not afraid to take risks, don’t rely on other people to do everything for them (like making investment decisions), and are actively on the look out for that next opportunity.

And best of all, these are typically the kind of people that are at all the networking events around town. People that know that the harder they work, the bigger network they create, the more oppotunities that they take advantage of . . . the faster they are going to achieve their dreams and be where they want to be.