Key To Getting Private Lenders For Your RE Deals

Performance Property Real Estate Question

Q: Gerald, I’ve been paying hard money lenders high interest rates for my rehabs. I’d prefer to have some private lenders. What’s the key to getting private lenders? Eric, Tinton Falls, NJ

A: Private lenders (in real estate) are people looking for additional income by passively investing in real estate. I wouldn’t necessarily assume that a private lender will necessarily have lower interest rates or better terms than a hard money lender however, since lending money is not their primary business and because they probably don’t have a lot overhead, you can often negotiate better terms when you borrow short term from a private lender–however, the devil is always in the details. That said, trust is the key to forging alliances with private lenders. People do business with those they know and trust. You must establish and then maintain trust to make a private lender comfortable lending you money. As with most things, it starts by asking–let people know you are looking for private money. You may be surprised who has money to invest, particularly when you consider how much money many people have in their retirement accounts. Retirement accounts are a great source of private money because retirement accounts are often uninvested or under invested. Start by asking yourself, what would make you comfortable loaning someone over $100,000 to rehab a home and you’ll start thinking and acting in the right way to make a potential private lender comfortable lending you money. Thanks for your question, Eric.

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