Real-estate investors Mike Gorius and Kevin Hart have opted for private money lenders (PMLs) over traditional ones, even though the interest rates are nearly double. The primary motivation behind this choice is the speed and efficiency that PMLs offer, which significantly expedites the deal-closing process. While traditional lenders provide lower interest rates, they involve more paperwork and a longer waiting period. In contrast, PMLs enable quicker transactions, allowing investors to seize opportunities swiftly. Networking plays a crucial role in finding these lenders, with strategies such as leveraging social media and cold-calling being effective methods.

The Advantages of Private Money Lending

Private money lending offers distinct advantages that make it an appealing option for real-estate investors like Gorius and Hart. The key benefit lies in the rapidity of transactions, enabling them to close deals within days rather than weeks. This swiftness is critical for their business model, which includes wholesales, wholetails, flips, and rental properties. By bypassing extensive documentation, they can acquire properties faster and capitalize on lucrative opportunities.

In detail, private money lenders facilitate quick closings by simplifying the process. For instance, Gorius and Hart perform their own inspections, eliminating the need for appraisals. This approach allows them to finalize purchases promptly. A typical deal involves a $150,000 investment—$100,000 for the property and $50,000 for renovations. At closing, the lender deposits the total amount into escrow, transferring ownership and providing funds for renovations. Payment terms vary based on the lender's preferences, ranging from monthly interest-only payments to lump-sum settlements at the end of the project. Once the property is renovated and sold, the lender recovers their initial investment plus interest, while the investors retain the profit.

Strategies for Identifying Private Money Lenders

Identifying suitable private money lenders requires strategic networking and outreach efforts. Before establishing a formal network, Gorius initiated contact with his existing connections, reaching out to 900 individuals via text messages. This approach yielded positive results, with approximately nine people expressing interest or responding favorably. The appeal lies in offering an attractive return on investment compared to leaving funds idle in bank accounts. By emphasizing the benefits of hands-off real estate investing, Gorius successfully attracted potential lenders.

Gorius also employs social media platforms like LinkedIn to expand his reach. He shares success stories, such as his first flip where he invested $18,000 and doubled it within ten weeks. In one post, he highlighted how using someone else's $18,000 could yield substantial returns, resulting in raising $280,000 from a single post. These strategies demonstrate the power of digital networking in connecting with private money lenders. Additionally, attending industry events and participating in relevant forums can further enhance networking opportunities, ultimately leading to fruitful partnerships that benefit both parties involved in real estate ventures.