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.

Question: “I want to buy a property, but I can’t get the money. What do you do when the banks won’t lend you money, and you don’t have cash to work with?”

Answer: “You don’t have to have bank financing to make this work – to buy real estate. One of my favorite way to buy cash flow properties is to use private money.
Find an individual who might be taking their money out of the stock market and wants to get a very good return. Think about it – it’s challenging right now for someone with, let say, $100,000 to invest it to get a 10 percent return. I challenge you to go out there and find that.
Investing in the stock market is just strictly hope because there is no way to know what’s going to happen. When the stock market is booming, there is no way to know what the market is going to do. Same thing when the market is down.
You just put in your money and then hope. All you’re doing is hoping.
And what about those people who are earning 2% on their CDs at the bank? To them, a 10% return sounds too good to be true.
If you are a retired person, and you have your money in CDs, you are not happy with the return you are getting because that’s the money you have to live on.
I’m certainly looking for anyone with money. I’m not doing direct marketing (sending out letters and postcard) to find them, but I’m certainly looking for them all the time, keep my eyes and ears open.
The best kind of marketing in that sense is just talking to people. Just talking to the people in your circle, you know and let them know.
But put yourself in the position of the private lender if they loan you money to buy real estate. If they invest in a mortgage you create in the process of buying a piece of real estate, your private lender knows exactly what they are going to get. It’s a much more predictable way you can get a pretty good rate of return.
I encouraged my friends with money to consider investing in first mortgages secured by real estate, whether they are lending money to me or to somebody else.
When you as a real estate investor have access to private money, it just totally changes things. You don’t wonder where your money will come from. Your focus changes to how you can use the money. That means the questions that you ask yourself on a habitual basis will change. That means your results are going to change. It becomes a matter of what kind of deals you want to go after. It will change your business, just like it changed mine.
Are you using money from the bank now? There are times when the banks tighten their standards. During those times, they might stop lending to you. That’s where private money can save the day for you.
Do you have a question about private money? Write a comment…

Answer: “Great Question. Getting a supply of private money to use over and over again in your real estate business can mean the difference between big money in real estate, or struggling to even buy one property.

There are three basic parts to getting started in borrowing private money.

The first part is to get really clear on your offer. What will you offer your private lender? What I’ve offered in the past is 10% to 12% interest. I will ask for a 5-year renewal on the note which is secured to a piece of real estate. I will pay interest only most of the time.

The second part is to develop a pitch. Call it an elevator speech you can quickly tell to your prospect.

This video shows an example of an elevator speech.

The third thing to do is get out and use the elevator speech. When you meet someone and they ask you what you do, that’s a perfect opportunity to use that elevator speech.

I will sometimes go to networking events with that single purpose in mind.

Remember that implementation is the key. Actually do something with this information.

Could you use private money? Take the first step right now.

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.