This is the third helping on how you can raise real estate funds through private investors.

Why would a Private Lender want to invest with you?
Private lenders have many benefits, when they lend money as a private investor.
1) Flexibility – They get to negotiate their own rules and loan terms, giving them the flexibility they want in the investment.
2) Higher Return – They can demand higher interest rates and return on investment, due to the demand and timing requirements, which they can meet differently than large institutional lenders.
3) Fixed Income – Most transactions of this nature result in fixed mortgages, which are attractive when stocks are volatile.
4) Security – Loan and/or mortgage is secured by real estate.
5) Tangibility – Investment is tangible, limited liability and requires minimal effort.
When you consider the benefits private investors have, compared to rigidly structured investments, they choose an investment in real estate. Your services provide them with a hands-off investment with flexibility, higher rate of return and secured by real estate. With these factors, you are easily recognized as a legitimate vehicle to earn money.
What are the sources of private lending?
1) Personal Savings – people have long term savings tucked away and not working for them.
2) Home Equity Lines – money borrowed at 5% and earning 15% gives investors a unique opportunity to use credit to gain return. Remember the 50% of all real estate is free and clear.
3) Self-directed retirement accounts – this is a huge source most retirees are losing money on their IRA’s. There are companies that will facilitate this process for you.
4) Groups of partners – many professionals form groups such as Doctors and Lawyers to invest in real estate.
What is the market for Private Lenders?
There is a great demand for private money especially, in today’s market and surprisingly enough, there are numerous private lenders looking for safe secured investment, collateralized by real estate. It has become so popular, you are now seeing private lending, where groups of people have partnered to lend money or in some events, wealthy families provide full-time private funding services. In these cases, it is a full time business, lending money, similar to the bank, with the benefits outlined herein.

Should I establish term of the money?
As we discussed in Lesson 5, when you establish your investment criteria, you will also establish the rate of return estimated for your investor. Along with these criteria, the investor wants to know the term of loan, payment terms and marketing information to support the investment. There will also be first and second mortgages, loans for repairs and possibly other needs for funding. Therefore, you should establish a basis of return for each of these scenarios, because in some cases, savvy private lenders will play with the rates. Typically a 2nd mortgage pays a higher return on investment due to less security. Short term loans may have a higher rate of return due to length of the period. If the property is fully leveraged at 100% they may require a higher interest rate. When you have a basis for these types of lending, the private lender will see that you have attempted to organize and streamline the returns and would prefer not to negotiate, however you must always be open to negotiations. Your goal is to get the money.
What do private investors look for?
1) Experience – the private investor would like to see a seasoned support “Dream Team”.
2) References – have a reference list of people like me help you bridge the gap if it’s your first deal.
3) Adequate Information to Make a Decision – provide an executive summary of the key elements of the investment such as investment, term, interest rate and ownership interest.
4) Profitable Investments – be sure that your investment presentation is attractive, meets your criteria and profits for the investors.
This is where you put on your game face and make it happen. Investors like to see organization and structure. Your executive summary must outline the investment and nature of the project. You should include a brief market and demographic paragraph, duration of investment and financial summary that indicates cash-on-cash return, equity required and total investment. This will most likely answer 90% of all major questions, which will allow the investor the ability to focus on confirming information and performing due diligence on market concerns.
Understanding the documentation
It is typically an open-end mortgage, where you pay profits based on each investment for this individual, while you keep their equity at work. The concept is to roll-over the equity after the conclusion of each investment term, after satisfaction to your investor with fixed income and profits. Once this cycle is accomplished you repeat it over and over again. It’s that easy!
Here are two documents that will save you over $5,000 dollars in time and money. These two simple documents allow you to borrow money secured by real estate. The last piece is the operating agreement for the Limited Liability Company which was given to you in the bonuses. You will form an LLC for each investment to minimize liability. It also protects other investments, when you structure each deal separately. If you have any questions, please send them to me by email. The first document is the mortgage agreement which outlines all the specifics.
A) Commercial Mortgage Agreement

This document reinforces the mortgage with a promissory note.
B) Commercial Note

Conclusion
Private lending is easy. You simply have to ask for the order. The principles outlined herein apply to all of the methods of private lending, which will be broken down for you in future lessons. If you want to accelerate please give us a call. Whether you are seeking individuals, forming a partnership or leaning towards securitized investments in the form of private placement memorandums, all of the principles apply across the board. Take the time to implement this process into your daily life, because having private lenders in real estate investing, is the key to success.

Wisdom and wealth are what you truly want in your life and the ability to contribute to others, with either money or knowledge. The ability to invest in real estate and to earn a boat load of money, gives you this opportunity to help the big picture. Consider yourself a leader who can provide the vehicle to wisdom and wealth. This is your chance to make a difference in the world.
“Your Financial Future is Based on The Decisions You Make Today!”