As many of you now, there is a great buying opportunity for the next few years or more in real estate. I am finding deals and would like to spend more time finding, analyzing, negotiating and cherry picking only the best deals. However, I seem to be spending all of my time searching for Private Money and creative financing. I only do deals with 50% LTV that cashflow tremendously and have multiple exit strategies and the ability to refi. Therefore, extremely low risk. I also offer 18-25% return to Private investors as there is plenty of room in the deals. How do you recommend finding these investors or joint venture partners? Any advice is much appreciated. Here are a couple of my ideas, please give me your thoughts.
Network thru real estate contacts, family and friends asking if they know anyone interested in Huge returns and low risk.
Postings on forums, blogs, message boards, craigslist, other advertisements
Get the word out at as many real estate clubs as I can
Mail to High Net Worth Lists or find out who holds deeds to property as a private lender
Your ideas falls under the regulation of state and federal securities laws. I think you have some good ideas, but you need to make sure your material complies with the law.
Asset protection gurus advertise in the periodicals read by doctors, lawyers, and high net worth individuals. You are trying to reach the same market and can use similar marketing.
Thanks for the advice. I’m curious what the best place to market to these high net worth individuals would be. I have tried newspapers and even bandit signs with some response. Periodicals may be expensive. I wonder thru Title, if I can find lien holders that are a persons name. That would lead me to believe a private investor funded the deal and reach out to them. What do you think would be the most cost effective method and source?
You jumped over BLL’s comment about SEC’s regulations. This is an area you need to be extremely careful in. Not saying you will be caught, but you need to understand the risks.
you can use a list of people with income over X dollars and market to them. Many list brokers provide such lists. You could also run a display ad in the business section of the newspaper under the financial section.
I think the best place to find potential partners and private money is your local club. Every meeting we go to there are members looking to loan money as well as members looking to borrow money. The key is getting together with someone you trust.
Head the warnings about complying with the SEC. I am not an accountant or lawyer, But as I was told the rules. You get into stickey ground borrowing or lending to strangers or persons you meet specifically to transfer money. At that point you need to be registered with the SEC. I was told borrowing from family or existing friends may be a littledifferent and not so restrictive. But check with your professionals.
My point is, become very involved with a club and really get to know the players. Go out for a drink or late dinner with the guys and really get to know them and what they are doing. Let them get to know you.
Thanks for the advice fireman. I actually go to 2 RE Clubs and always network afterwards. I plan to be more aggressive though and present the investment opportunities at the beginning of the meetings when they allow the Haves and Wants so to speak. I also plan to put flyers out at as many clubs as I can to really get the word out. Almost all of the response has been that they are looking for Private Money Investors as well and they don’t want to give up their contacts even after I offer them a profit split or to make it worth it for them.
I agree that building trust is the most important thing. I am approaching this as a numbers game. I will likely get 49 Nos before I get a YES but all I need is one YES!! Thanks again.
I was doing some research on this issue recently and found an interesting little tidbit. Soliciting or selling unregistered securities makes the seller liable for any investment losses. There is a potentially great opportunity here, but it only takes one loss to bring down the house. There won’t be any problems when you are making money. They come if someone loses and then complains to the state.
I imagine most will want personal guarantees as well as be secured with the property. I won’t touch anything above 50% LTV or that won’t cashflow so the hope is that their is no risk of losing money. I have some pretty solid exit strategies and am not opposed to a refi into a blanket loan and hold for cashflow. That makes for very little risk to the investor.
I used to work at a financial advising company and am actually having a buddy ask the compliance officer about it. I am curious to see what the response is, compliance officers are really thorough and don’t take any risks with this stuff.
SEC provides free advice through their attorneys, you can call them at their 800 numbers and ask them directly. I’ve asked them before and they said any solicitation of funds/loans considered securities and I would be liable under the law. Also, you may not comingle the funds.