This work is the 1st of a 3 part series on Personal Money Lending.
I have a few rules that I follow with regard to financing my real estate purchases; I do not use my very own money and I do not borrow money from banks. The hidden key to securing enough capital to fund your money deals is straightforward, and you'll find it living in your neighborhood, at the food shop, or sitting next to you at a restaurant.
The answer? Personal Money Banks.
Non-public Cash Banks and Hard Money Banks are a different breed - so don't confuse the two.
Personal Lending became a very popular investor vehicle after interest rates declined below 5% on traditional Cash Markets and CD's. Folks with extra cash started looking for a more lucrative way to invest, and acquire a higher ROI.
That started the revolution that you see today referring to Personal Cash Lenders. This trend toward personal cash will keep going strong as long as standard interest rates remain low and standard mortgage and hard money remains tough to get.
Although securing Personal Lending seems very simple, our government made a decision to throw a monkey wrench into the mix. When borrowing money from someone else with the guarantee to repay them, that "promise to pay them back" is what's called a Promissory Note. This Note is regarded as a Security, and is so governed by the Securities and Exchange Commission.
"Why does this matter to me?" you can ask.... Well, the SEC has firm rules and regulations that rule precisely how a backer can "use" a Personal Lender. One being, you Need to be a licensed Security Broker to approach and proposition a Private Bank for the employment of their capital to fund your property investments.
But fear not , there are exceptions!
The SEC DOES allow the average financier (someone that isn't an approved instruments broker) to approach mates, family members and/or friends. Here's where the loophole can be found.
What's an acquaintance? Well, loosely defined- an acquaintance is "a person known to one, though not a close friend". In other words, maybe someone living in your neighborhood, somebody you meet at the corner shop, or someone that is sitting next to you at a restaurant.
Now, you may not solicit a personal bank for his or her money, but there is no rule against a personal bank OFFERING his or her money to you. I'm sure you're saying "yea, if it were only that easy..." Well folks, it is. The most important difficulty standing in between you and that private money is your fear of being confounded. All you have to do is adopt what I call, the "6 foot rule". Anyone that gets inside 6 feet of me, I say this:
Tim: "Hi, my name is Tim. What is your name?.. So what do you do for a living?"
Non-public Lender: "My name is John and I am a doctor"
Tim: "Oh yea, what kind of doctor?"
Non-public Lender: "I'm a Neurosurgeon..."
Tim: "Neurosurgeon huh, that is interesting..." At that point, inevitable they will ask you what you do for a living...
Personal Lender: "So Tim, what is the thing that you do?"
â€"-BINGOâ€"-
They have came Up to you. Now you are free and able discuss business without fear of consequences, because they are now an acquaintance.
Tim: "I am a property investor who buys and rehabs houses, and at times borrow money from non-public folks, who are looking out for better than evens rates of return. I sometimes pay between 10-15% interest for the use of this cash, which will fund my acquisition and rehabilitation costs. Did you know anyone that would be interested in something similar to this?"
This is an indirect approach of speaking to possible personal lenders that will eliminate the phobia of asking people to lend you their money.
The financially savvy folk will say something similar to this...
licensed money lender : "Well Tim, I might basically have an interest in a break like that! Please let me know more!"
When they take interest in your offer, set up a meeting for a later time. Get all of your material together, and show them your financial model. When you grow a relationship with these people, they're going to become one of your biggest assets to your real-estate investing business.
Look for part 2 of this 3 part series on Personal Money Lending in one or two days!
I have a few rules that I follow with regard to financing my real estate purchases; I do not use my very own money and I do not borrow money from banks. The hidden key to securing enough capital to fund your money deals is straightforward, and you'll find it living in your neighborhood, at the food shop, or sitting next to you at a restaurant.
The answer? Personal Money Banks.
Non-public Cash Banks and Hard Money Banks are a different breed - so don't confuse the two.
Personal Lending became a very popular investor vehicle after interest rates declined below 5% on traditional Cash Markets and CD's. Folks with extra cash started looking for a more lucrative way to invest, and acquire a higher ROI.
That started the revolution that you see today referring to Personal Cash Lenders. This trend toward personal cash will keep going strong as long as standard interest rates remain low and standard mortgage and hard money remains tough to get.
Although securing Personal Lending seems very simple, our government made a decision to throw a monkey wrench into the mix. When borrowing money from someone else with the guarantee to repay them, that "promise to pay them back" is what's called a Promissory Note. This Note is regarded as a Security, and is so governed by the Securities and Exchange Commission.
"Why does this matter to me?" you can ask.... Well, the SEC has firm rules and regulations that rule precisely how a backer can "use" a Personal Lender. One being, you Need to be a licensed Security Broker to approach and proposition a Private Bank for the employment of their capital to fund your property investments.
But fear not , there are exceptions!
The SEC DOES allow the average financier (someone that isn't an approved instruments broker) to approach mates, family members and/or friends. Here's where the loophole can be found.
What's an acquaintance? Well, loosely defined- an acquaintance is "a person known to one, though not a close friend". In other words, maybe someone living in your neighborhood, somebody you meet at the corner shop, or someone that is sitting next to you at a restaurant.
Now, you may not solicit a personal bank for his or her money, but there is no rule against a personal bank OFFERING his or her money to you. I'm sure you're saying "yea, if it were only that easy..." Well folks, it is. The most important difficulty standing in between you and that private money is your fear of being confounded. All you have to do is adopt what I call, the "6 foot rule". Anyone that gets inside 6 feet of me, I say this:
Tim: "Hi, my name is Tim. What is your name?.. So what do you do for a living?"
Non-public Lender: "My name is John and I am a doctor"
Tim: "Oh yea, what kind of doctor?"
Non-public Lender: "I'm a Neurosurgeon..."
Tim: "Neurosurgeon huh, that is interesting..." At that point, inevitable they will ask you what you do for a living...
Personal Lender: "So Tim, what is the thing that you do?"
â€"-BINGOâ€"-
They have came Up to you. Now you are free and able discuss business without fear of consequences, because they are now an acquaintance.
Tim: "I am a property investor who buys and rehabs houses, and at times borrow money from non-public folks, who are looking out for better than evens rates of return. I sometimes pay between 10-15% interest for the use of this cash, which will fund my acquisition and rehabilitation costs. Did you know anyone that would be interested in something similar to this?"
This is an indirect approach of speaking to possible personal lenders that will eliminate the phobia of asking people to lend you their money.
The financially savvy folk will say something similar to this...
licensed money lender : "Well Tim, I might basically have an interest in a break like that! Please let me know more!"
When they take interest in your offer, set up a meeting for a later time. Get all of your material together, and show them your financial model. When you grow a relationship with these people, they're going to become one of your biggest assets to your real-estate investing business.
Look for part 2 of this 3 part series on Personal Money Lending in one or two days!
About the Author:
Robert Newton is a business writer specializing in finance and loans and has written influential articles on the finance industry. He has done his experts in Business Administration and is currently helping as a pay day loan consultant.
No comments:
Post a Comment