How To Get Private Lenders To Fund Your Next Investment Property Purchase

Jul 13, 2016

If you’re a commercial real estate investor, what do you say to someone who asks what you do?

Your answer needs to establish trust while sparking interest in the listener. Keep in mind that you’re asking private lenders to invest millions of dollars in you. You need to be able to describe what you do in a way that gets them to ask you how they can get involved.

Here are some ways you can achieve that:

Don’t Spend Time Talking About Yourself

The first way is to focus on your listener. That means you don’t talk about yourself, but you mention what you can do to help them.

For example, you can explain that you have helped private lenders achieve a steady return of 6%-8% on their investment. That is secured by real estate that has high-quality, investment grade tenants like Walmarts. This specific explanation gives the lenders an idea of the kind of returns they can expect.

It also makes what you say more believable, and tells the prospect that this is a safe investment. It also allows the prospective private lender to imagine themselves getting the same return on their money.

For those who have self-directed IRA’s, you can later point out how they can use the money to get a higher return. After that, they will definitely be interested in hearing how you can get them a higher return from the one they are currently getting.

Don’t Forget To Make The Close

The important factor in discussing what you do is that you can’t simply make that statement and let it just hang in there. You need to close the statement by asking them to take a particular action. If you say, “Do you know anyone who would be interested in making 6%-8% on their investment,” you will be giving them an opportunity to either self-qualify or provide referral of someone who may be interested.

When you do say this phrase, make sure you say it with confidence. Don’t hesitate, don’t pause.

how to behave with private lendors

In order for private lenders to trust you and feel that you are legitimate, you need to project self-confidence and assurance that what you have to offer is beneficial to them.
Of course, since typically most IRA’s will be making them a lot less for their money, this is a good deal.

Build A Pool Of Lenders To Choose From

Having a pool of private lenders to choose from is essential for commercial real estate investors. First of all, if you use private lenders to fund your next deal, you can make sure not to have out of pocket expenses. That means no money for down payments, closing costs, or renovation expenses. Instead of having to give away 50% of the equity because you lack the funds to fund the deal in full.

Another reason why private lenders are important is that if you structure the deal correctly, and they know you, you’ll be able to structure the deal so you can get cash at closing. This can happen if the property has a low LTV so that you can get some profit upfront that allows you to add to the cash flow of your business.

Private lenders also give you the power to pay cash and close quickly. Since you know the lenders and they aren’t interested in making you jump through the same hoops as banks do, it is usually easier to get them to fund a good CRE deal.

Private lenders let you structure deals in the way that best suits the property and your investment goals. Instead of losing out on a great deal by waiting on a bank approval or worse, having the bank limit you on how many loans you can have on the property, private lenders will fund your CRE deal much easier.


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