You may pay more but there is a certain peace about private money you almost never get with bank money; you can get private money as “non-recourse money.”
That is to say: the loan is a collateral only loan and the lender had NO RECOURSE against YOU PERSONALLY. And you don’t have to sign a “Personal guarantee.”
Most people worry that they don’t have money so they can’t do deals.
The successful model takes some nerve and guts at first; contract a great deal and use the deal to attract the money. That’s right…good deals attract money.
You just have to hold your deal up high enough for others to see.
It takes some courage, some faith, and ability to function under pressure. You’ll get over it!
Now, with some experience under your belt, start cultivating private money in advance.
Take examples of your deals to attorneys and CPAs. Show them your business model and ask them for their professional opinion, as good businessmen, if they see any problems with what you’re doing.
Never ask them for the money…they should plug themselves in automatically…as any good businessman with excess money would.
I offer 8%, interest only for 5 yrs, and a first lien on the property I’m going to buy. They are loaning no more than 65% of the value.
These days I’m averaging 52% Loan To Value (LTV). That is to say; I’m borrowing $52,000 to buy houses I can owner finance for at least $100,000.
The private lenders first lien position is so secure I deserve the 8% interest rate. The worst thing that will ever happen to my private lender is that I’ll pay him on
time and eventually pay them off.
The private lender would make far more money if I defaulted.
The art of finding private money is in your ability to locate/recognize “Suspects,” get an appointment, and then explain your business model clearly and simply;
to get their opinion as an admired and respected business person.
If they DO NOT plug themselves in automatically, do the old “Columbo” close on them: as you’re walking out of the meeting, as you get to the exit door, stop-turn around-look at the floor-massage your forehead with your right hand for just a few seconds- look up at your “suspect” and ask,
“Do you know anyone who would be interested in loaning money on this deal?”…but NEVER ask the suspect for money.
You will always and only be there for their opinion.
Come to my webinar and I discuss this and other tips about Owner Financing.
Send me any questions you have at support@1000Houses.com
Get The Art Of Owner Financing and My Book “My Life & 1000 Houses”