The Top 5 Effective Marketing Techniques To Find Private Lenders To Fund Your Real Estate Deals
Marketing is always the key driver to running any business. We always need to be thinking about how we can differentiate our strategies to get ahead and stay current. A lot of my clients ask me all the time if there are any new methods to sourcing private money for real estate deals. Sometimes there are new approaches and sometimes the old, proven methods still work best. Below are the top 5 that I’ve seen the best results from when sourcing new private money sources:
1. Small Aggregate Lending Sites – These sites are put together and funded by other individuals who want to make a return on their money. An example of this is Prosper.com. This site will pool individuals’ money together and bet on you based on your profile to negotiate the interest rate, etc. Their limit is $25K loans but these are great for funding renovation and/or holding costs when you buy a property subject to the existing loan, the seller finances the property on a first mortgage, or you want to renovate a rental that you have. In today’s market another great strategy is making up the back payments on a foreclosure deal and taking it over subject to the existing financing. The great deal about these Prosper.com loans as they aren’t secured against the property.
2. Search the Courthouse for Private Note Holders – This is a great way to find private lenders to fund your deals. You know why?…because they are already pre-qualified to the methods involved in private lending. What you do is go down to the courthouse and ask someone there to help search their database to find all the houses that were sold that had Mortgage Deed of Trusts either in a private party’s name or in a small corporation. Look for trending and if one name pops up more than once, that’s your big dog in town.
3. MLS Buyer Financing Method On Closed Deals – This is another great method to utilize. If you don’t have access to the MLS (Multiple Listing Service) in your local area, offer a real estate agent a few dollars or lunch to pull a query for you. What you are looking for is the following criteria: Transactions that were sold in the last 12 months with the financing method type of “cash.” These are the folks with money and usually know what they are doing. Look for trending on the same names on the list and those are also your big dogs. I’m thinking Great Danes’ at this point. J
4. Motivated sellers – Ok, it’s obvious but many of my clients never think to ask that seller that they just cashed out their house on a transaction what they are going to do with the money when they receive it. A lot of these folks don’t know what to do with it and guess what? You are in the prime position to introduce them to your private lending program. Think of it as you are doing them a favor. Another tip: Don’t offer up an interest rate until you ask them what kind of return they are expecting. Don’t be surprised if they say 4%!
5. Word of Mouth - Some of you reading this might think that I’m ridiculous for mentioning this because its so obvious. I tell you what, after analyzing all of the money that I’ve borrowed from private individuals in the past on deals; the number one method is Word of Mouth. What you need to do is create a 30 second “elevator speech” on what your private money program is and how it can benefit them. You need to practice this, I have a lot of contact with real estate investors that when I ask them what their program is they studder, look around, say “um” a few times and tell me that they don’t know. That’s ok once but not twice so just write it down, practice it a few times, and be aware of whom you come in contact with. Don’t prejudge people because you never know who has the dough based on looks. Don’t believe me and want a real life example of this? I love classic cars and really enjoy watching the Mecum Auto Auctions and the Barrett-Jackson Auto Auctions on tv when I can. Next time you are watching, look at the types of people that are dropping $100K plus on these cars. Let me give you a hint, they don’t smooth like Brad Pitt. Some of them are in t-shirts and torn jeans with a John Deere hat. I think that you get my drift here, most people with real money don’t flaunt it so don’t prejudge a book by its cover.
To your success,