Hey there! A great question came into my Deal Maker hotline that I want to share in this here article.
“What are some of the better ways to find private money lenders?”
First, money lenders are all around you.
But!
There is a little bit of competition that we haven’t had for a long time — I’m talking for about 2 decades, with interest rates at or hovering around zero for as long as they did. There was no good way to get any yield without exposing oneself to greater risk than, say, a money market account or short-term Treasuries.
A bit of a lesson
I actually have a money market account where I’m making 5.3% right now.
Now, if you look at the CPI — Consumer Price Index, which is where numbers are surely manipulated to placate us as consumers it’s presented as lower, in my opinion much lower than reality.
So, if you look at the real rate of inflation, even a 5.3% return in a money market account is still yielding a net negative return. Even though making 5.3% on cash sitting in the bank seems amazing compared to interest rate returns for many years, you’re still losing money because you’re not keeping up with the real rate of inflation, which today is, for sure, greater than 5.3%. Anyone who’s reasonably financially savvy knows this.
What I’m getting at is this: working with private lenders today is going to cost more than it has for the past 2 decades or so.
You’re going to have to pay a higher rate of interest today than, say, 2 years ago, before the Fed started hiking rates at the most extreme frequency, perhaps ever.
What does that mean?
Well, if a money market account is going to pay 5.3%, and a short-term Treasury is paying ~5%… you’re probably going to need to pay 6% or 7% to get a private lender excited.
Now, one thing that you have going for you is that any private lender who’s reasonably financially savvy knows, like I do, and you do, that 5.3% or 5% return is still a net negative because the real rate of inflation is higher than that.
A 6% or 7% return is way better than 5 or 5.3 but….
Is it still a net negative?
To a private lender it may not matter. What I’ve always said is that to win with private lenders you will need to pay an interest rate that makes other low risk investments pale by comparison. By how much, will vary from lender to lender but it’s important to keep in mind that what you’re offering is a very safe investment and at a better return. I other words what you offer is very competitive.
Better ways to find private money lenders
Think about this…
When you’re at the grocery store, when you’re at a holiday dinner with your extended family, at the local sports bar with your buddies, at Home Depot, just about everywhere, you are surrounded by people who are potential private lenders.
They just don’t know it, and you don’t know it until you start talking about the opportunity.
The better way to find private money lenders is to talk about what you’re doing and get someone’s interest. People are interested in how other people are making money, how they can get involved, peripheral ways to get involved with less risk.
I’m having those conversations all the time in my world, probably because I’ve been doing it for years and I’m very comfortable with it. The sooner you start doing it and the sooner you become comfortable with having those conversations, the better.
Private lenders are all around you.
There’s also our tool called the Private Lender Data Feed. What that is, very simply, is private lenders who, as evidenced by the public record, have loaned money to investors on real estate where they held or still hold a mortgage and were paid an interest rate to do that.
>> Click here to access private lenders in every market across the country!
We see evidence of that on the public record (in bulk) and present it to you in a nice neat, searchable, filterable, package that is regularly updated, called the Private Lender Data Feed. You’ll see what properties they lent money on, where they’re located, the type of property… and you can begin to get a sense for what that private lender is looking for in terms of their next investment.
It’s a little bit like reverse engineering…
When we reverse engineer wholesaling, we go to the Investor Buyer Data Feed. We look for investors in the area where we are or plan to do business. We look at what they’re buying, where they’re buying it, the number of bedrooms and bathroom, what they’re paying per square foot, etc. and we immediately know now what that investor is looking for so we can go find something that will interest them based on their historical activities.
Same thing with the Private Lender Data Feed.
One of the great benefits of the Private Lender Data Feed is that it’s not incumbent on you to sell the potential private lender on the idea of being a private lender. They’re already sold on the idea because they’ve already made private loans.
Bottom line, it’s a deep list of very well-qualified prospects right there at your fingertips.
There you have it…
Talk to anyone and everyone about what you do, you never know who could be sitting on cash to lend out for your deals. There’s no doubt that there is an unfathomable amount of cash sitting on the sidelines right now, so why not tap into if for your deals?
Check out the Private Lender Data Feed for another option, too.
Get to it!
—Cam Dunlap