what is a good way to find private invstors who will loan me money for real estate deals and how do i make them feel secure? how do i make them want to hand over there money to me. also if i find 5 people who only have 20 grand to invest, can i use all them in on deal on a 100,000 property?
The best way to find private lenders is to advertise for them and to have a professional solicitation package available for their review. This package is what establishes your credentials, explains how private lending works, what they can expect through the process from the time they hand over the money to the time they get it back and any other details needed to sell the investor on giving you a mortgage.
The toughest part starting out is your credentials. It is sort of a chicken/egg scenario. People don’t want to lend you money to do a rehab if you have no track record of being a successful rehabber.
So if that is your situation, you need to figure out how to build a set of credentials to work around this challenge.
Oh, the other aspect is that you really have to sell the private lender two times - first on you and then 2nd on the specific deal you want that lender to fund.
I’d be careful soliciting a number of investors, especially with brochures, making representations on money needed, and the probable returns.
There was a fellow named Merle Woolley selling courses on this but stopped doing it because soliticitiong funds can run you afoul of the SEC who regulates such matters. You’ll need to be acquainted with laws regarding “security offerings”.
If you partner up with a partner or two via an LLC to control some RE, it’s one thing. But to advertise and solicit funds from a larger group to invest in real estate is another thing.
It’s not that “security offerings” are illegal, but the expense of doing it legally is costly. For the big boys, they call it REIT’s.
If you plan on advertising you need to register with the fcc and follow some very strict rules - but it’s fairly easy.
Forget the ad.
Get 5 people together with $20K each. Everyone sits down with one attorney and writes up a purchase agreement. You can do a LLC or just a simple partnership. Finding 5 people with $20 is easy if the deal is good. When you sell the home the split is whatever is agreed to in writing.
When starting out this is a good way to get going. Save EVERY penny you make on this deal and the next one do with 3 or 4 people. 3 or 4 houses later your on your own but also have a track record and 5 other potential partners waiting if you need them.
P.S. make sure YOUR the one finding the deals. That way, when you want to split your not left sitting on your hands. These will be the hardest deals you do, personality clashes, some people working alot more than others, all the usual partnership B.S. just get through it, and don’t be a dope and buy a Corvette when you cash your first few checks, that stuff with come in abundance later if you play your cards right early.
The SEC will only get involved if you advertise an “investment opportunity” without filing a private placement memorandum. If you advertise for “business partners”, you would be fine.