Its not as easy as going to an office and sign an application for a loan when finding private real estate lenders. It will be a great challenge for those who want to become an investor and enter the real estate world if you are lacking capital. Since a property investor will need enough funds before they can get started with this type of venture. So private real estate lenders is a great option to help you with your financing needs.
The mortgage financing are often managed by recognized financial organizations like prominent banks and credit unions and these are regulated by state and federal guidelines. They are what we call the public lenders and it is tough to get a loan without a good credit report. On the other hand, private real estate lenders are investors who lend money as an investment or for profit and they can provide you with a loan regardless of your credit history.
With the economic recession especially the public lenders suffered a great deal of losses because of defaults and foreclosures. Some people may have fully regained and are ready to apply for loans once again but the public lenders, except for the private, have not fully recovered from the impact of the recession. And one of the other issues why public lenders do not allow loans is due to the decline of people’s credit score during the recession, thus making the private lenders the best option for people who would like to obtain real estate loans.
So before you approach any of these private real estate lenders, you will have to be prepared, know the things you will need and work out a business proposal which includes the market review and analysis, your monthly projections as well as you target properties, prospective investors and potential tenants. You will have a great chance to attract the lenders to help you with your financing needs if you can outline all of these properly. Aside from working on a business proposal, you should also make sure to know and speak to people who have connections in the financial or legal worlds.
Then try to send out solicitation cards or emails to prospective investors to whom you have been referred to and invite them to a business venture type of seminar. Then in there you will impress them on how fast you are going to get your revenue on their investment and how much is the net they can expect. So be sure you know these figures before you do your presentation.
And speaking of presentation, make sure you highlight the important factors like, the target properties, your monthly revenue projections and the key figures. You have to show them how this investment will prosper and how quickly can they get their returns. You may also have to include the estimates on rental incomes, forecast in housing process and all your other vital research on the neighbourhood. After you presented them your proposal, give them a copy of your business card. And as you may have obtained their contact information, you can then send them a thank you letter for attending the seminar and follow up with the strongest candidate.
One more thing you have to keep in mind when borrowing from private real estate lenders, is that you have calculate the installments of the loan and pre-payment so that you will have an idea on what you should prioritize and this will also serve as a reminder for you to keep up with your payments otherwise, late payments and defaults will only get you into a deep trouble