In this article I’m going to give you my two top tips for getting financing if you are just starting out.

1) Find a Money Partner
The first tip I’ve got for you is to get into a partnership where you are doing all the work involved in the real estate transactions. You find the properties. You supervising the rehab. You provide for the property management.

The other party, your partner, will be responsible for all of the financing. That means they will put up the money and credit to fund the project.

But at the end of the day, you are 50% owner of these properties. The down side is that you are giving away half of the deal.

When I was just starting, for a whole year I bought ten properties with a partner in this manner. These properties were long term rental. I still on those partners those those properties in partnership.

2) Borrow from Friends and/or Family
The second tip is to rely on friend or family as a private lenders. Private lenders are cheaper than 50-50 partners in the long run.

However, most of the time it’s a great for you AND a great deal for the private lender. If they’re looking to make a good return on their money you can be an excellent opportunity for them. For example, if they’re going to the bank to buy a CD, they might only be getting 3% or less. But if you are borrowing that money from your private lender on real estate you can offer them 8% to 10% interest secured with a mortgage.

My private lenders have been critical to me since the banks have tightened up their lending standards.

Are either of these easy? No way. But if you are just getting your start as a real estate investor and want to buy properties for the long term, they represent a great avenue for you to get the financing you need.

The next question is how to approach a prospective private lender or money partner. I’ll leave that to another blog post.

This is a recent question posed about private money:

Question:  I am currently trying to raise private money.  Right now I have been able to save half of the money I need.  I am looking into financing and a few other options to overcome my dilemma. I have called some investors but I don’t want to do nothing while waiting for their responses. I’m offering investor (private lenders) 10% with a loan guarantee and i’ll have to pay the principal amount on the agreed time. So can give me some ideas how to get private money from investors so that I can buy bank owned properties or buy a house on a cash basis?

Answer:  One thing you should do is to know what exactly WHAT you are offering when it comes to getting money from private lenders.  It is better to present something to people without giving them options to customize it according to their conditions. 

Let’s say you offer them 12% per annum which 1% is paid monthly with a guarantee that they will have their money back in three years. With this kind of offer for your private lender, you are giving them a simple and clean deal.

In cases when your prospective private lender does not agree with the terms you are offering, you can think of another good option which you can present to him, but you will always have the option to negotiate or not. The option you are giving them is simple and clear. Its more effective when you offer something with a clear outline, like answering a Yes or No question rather than, I think I like it or I don’t think that works for me.