Being a real estate professional in the Metro Detroit area, I’m constantly asked “Scott, can you find me a deal?” 100 percent of the time my answer is ‘absolutely I can within 24 hours’. Then I add asking ‘do you have a source of money to be able to close the transaction and purchase the real estate deal I’ve found you quickly?’ More times than not I catch them with a blank stare on their face and not knowing what to say.
All across the United States there is plenty of ‘deals’ to be had, but with the lending restrictions that are being put out there and the competition to acquire these great deals, it’s virtually impossible to build wealth through real estate without having different sources of money on hand to get the deals closed.
My easy answer to this is ‘private money’. Again, I reiterate that it is my easy answer. The harder part of the equation for most people new to real estate investing is how to acquire the money.
My quick synopsis is three key sources that I have directed my clients towards to start on the path of investments that will be profitable.
1. Family Members
I know what most people will say here is that they do not want to mix business with family. And truthfully that makes for a good argument, but I have also found that most arguments are based on not having anything to put the family members mind at ease knowing that they will get a return on their investment and much less getting back the initial investment itself. What’s great about private money in real estate is that the money lent is secured by the real estate itself, which in turn will give your family member a little peace of mind.
2. Financial Advisors
Many people play it ‘safe’ and put their money with their financial advisor. But like some people that I know as their ‘nest egg’ starts to grow they get the itch to put their money in ‘play’ in another sector and they start bugging their advisor for options. I would recommend contacting financial advisors and letting them know you are a seasoned investor and if they have any clients that have monies that they would like to invest and have it secured with real estate. You would be surprised at how many will sit and listen to you.
3. Real Estate Investor
You read this and think, wait a minute aren’t they my competition? And my answer is absolutely, but they are also in the business of making money. And the best part of this source is they already know what they are looking at in terms of if the deal is going to make sense. There is a caveat to this in that the interest rates may be a bit higher, but if the deal is ‘juicy’ enough then it will be a win-win the whole way around.
There you have three sources that you can use to locate private money to help you through your real estate endeavors. Every client I have that takes their business seriously, I tell them to start there. And soon enough they will be the one being approached to invest in someone’s deal.
By Robert Holiday