After the downturn in property rates by the economic recession, banks and private investors have become vary of investing in real estate. This along with general negative sentiment prevailing in the economy, has made it really difficult to raise money for any kind of investment, especially real estate, as this sector is already in the doldrums.
Yet, there are individuals who think that falling real estate rates are an opportunity in disguise! As the rates are low, properties can be bought at minimal prices and sold off at high rates once the market picks up. Since investors are no longer willing to buy into this, one needs to come up with a proper plan to raise private money for real estate.
Existing Private Lenders
The first thing to do is get in touch with private investors in your city. These people have the money for investment, but lack time, knowledge or expertise, to look for lucrative real estate investment deals. To make them agree to invest, you need to guarantee them a certain percentage of money, over and above of what they have invested.
There are two ways in which to approach private investors. You can have a one on one meeting with them. During the meet, you can tell the investor about your plan, the money that you estimate can be made through it and how much the investor can look forward to earn through the deal. Another way to approach the private investors is to hold a joint meeting.
During this group meeting, you can hold a presentation of your program and bring forth its benefits to the investors in a very professional manner. If you have any experience of such programs and they have proved to be successful, give the reference during the meeting. This will help in lending a certain amount of credibility to your current program.
When it comes to private investors, you can either enter into a partnership or have a profit-sharing arrangement with them. But one thing that you can be sure of is that most of them want to avert any kind of potential risk that there might be in investing in your program.
So, initially, don't be surprised if they are willing to invest only a small amount. If this is the case, you need to build a rapport with them, network more and stay in touch, so that when they begin to trust you and your program more, they lend some more money for investment.
Acquaintances and Friends
You do not only have to depend on private lenders for raising money. Any person that you know or come across on a daily basis, is your potential investor. This includes your neighbors, friends, family members, doctor, colleagues at work, etc.
Tell them about your plan and see whether they are willing to invest in it. So, build a wide network of friends, their friends and acquaintances and so on. You never know from which quarter money will pour in your direction.
When raising money for investment from private lenders, you should have a very good 'deal' to talk about. Unless and until you can offer them a lucrative deal, such as an excellent rate of interest, no amount of persuasion or marketing gimmicks will work.
Direct mailing campaigns, such as sending mailers by post to potential investors, especially to the out of town ones, emphasizing on the 'money' that a person can make, have high chances of yielding the right results for you.
The problem when borrowing money from private lenders is the high interest rate they might levy, as much as 20%. Still, if you have to strike a deal, these lenders are perfect, as you can get money from them in no time and sometimes without any documentation! When it comes to private money lenders, you should be ready to offer them a deal they cannot refuse!