Tag Archive for: private money

Cons of Private Money: What to Watch Out For

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Here are 3 cons of private money to keep you informed.

Private money (money from real people) is one of the most valuable tools a real estate investor can keep on-hand.

It’s flexible, it’s cheap, it’s easy… But finding and keeping lenders is the hard part.

Here are 3 cons to private money you should watch out for.

Cons of Other People’s Private Money

There are plenty of positives, but it’s wise to be aware of some potential trouble spots too:

  • It’s harder to find lenders. You can’t walk into a bank to get this kind of money; you just have to find the right individuals. Your OPM lenders don’t necessarily have to be millionaires, but they do have to have a good chunk of free money available for you. It can take time to find these people.
  • Keeping OPM lenders can be difficult. It’s takes a lot of time and attention to nurture your real private money lenders. You need to keep their money secure, pay them on time, and provide them with good opportunities. It’s best to have multiple OPM lenders available to you.
  • Finding other people’s money means selling the people on it. People who would most benefit from being a private lender might not even know what it means. If a doctor, dentist, teacher, etc is keeping their life savings in a bank account or IRA, then they might get a better return doing private lending. However, people outside of real estate might not understand how it works. It’s your job to explain how their money gets secured and how the process works.

The funding itself may be easier, faster, and cheaper, but with private money, finding and managing a relationship with a lender can be the hard part.

Just remember that anyone with money is looking for a stable return. If you can prove you’ll provide that, funding opportunities will start rolling in.

How to Get Other People’s Money

To avoid cons, how does the process work once you find other people’s money?

If you need help finding, attracting, convincing, or setting up an OPM lender, let us know. For the last 15+ years, we’ve raised millions and millions of dollars through OPM. Send us an email at Info@TheCashFlowCompany.com with any questions.

Download our free real private money checklist here.

Read the full article here.

Watch the video here:

https://youtu.be/CyS9V9Z7zBQ

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Why You Should Use Private Money in Real Estate

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Private money in real estate has its pros and cons. Here’s what you gain from using it.

Private money, other people’s money, real OPM.

Aka… funding from real people, not institutions.

With real other people’s money, there is no box. You create all the terms.

Depending on the individual OPM lender, you can get small gap loans, or large loans for an entire project. Other people’s money can be short-term, long-term; down payments, carry costs; the options are limitless.

Private Money in Real Estate: The Pros

In addition to the total flexibility of other people’s money, here are some other benefits to this style of funding:

  • Firstly, it’s great for beginners. You don’t need experience, and you don’t need the qualifications required by most traditional lenders.
  • No (or limited) red tape. They won’t check your credit score, income, tax returns, or require an application.
  • It’s cheaper. There are almost never fees, and the interest rates are comparable to a bank’s (on the lower end for financing).
  • You can close quickly. You don’t have to wait for an appraisal to happen or for an application to be processed. Funding is a phone call away.
  • Do any deal. OPM lenders won’t have a box for you to fit in. As long as they get their return, most people could care less what type of property you invest in.

Why Would Someone Give You Private Money in Real Estate?

Is it too good to be true? Why would a random person want to give you their money?

The thing about using real other people’s money is it’s an easy win-win scenario.

People with a lot of cash are always looking for a good place to put it, but:

  • Most people don’t want to be in charge of their own real estate investments.
  • But, banks have a very low rate of return.
  • Also, the stock market is unpredictable. (A good source of real OPM is older individuals who are nearing retirement. Stocks give a good rate of return in the long term, but when someone plans on retiring soon, they’ll be looking for shorter-term stability).

These people are looking for you as much as you’re looking for them. It’s just a matter of attracting (and keeping!) the right people.

More Info:

Download our free real private money checklist here.

Read the full article here.

Watch the video here:

https://youtu.be/CyS9V9Z7zBQ

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Get 100% Financing with REAL Private Money (Other People’s Money)

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The pros and cons of using other people’s money in real estate investing.

When we say real private money, we’re not talking about companies who’ve just changed their name from “hard money lender” to “private money lender.”

We’re talking about real people. Actual individuals who want to lend you money on a real estate transaction. Real money that’s cheaper, easier, and faster than any funding you could get from an institution.

Let’s go over how other people’s money can be used to fund your transactions, plus the pros and cons.

How Does Other People’s Money Work?

Real private money is the ultimate flexible funding for your real estate investments. Once you have a relationship with a lender, funding a deal is as simple as calling them with a closing timeline and the amount you need.

Remember, we’re not talking about big Wall Street companies that call themselves private money lenders. These types of lenders have strict guidelines and an underwriting process. They have a box you have to fit in.

With real other people’s money, there is no box. You create all the terms.

Depending on the individual OPM lender, you can get small gap loans, or large loans for an entire project. Other people’s money can be short-term, long-term; down payments, carry costs; the options are limitless.

Benefits of Real Private Money

In addition to the total flexibility of other people’s money, here are some other benefits to this style of funding:

  • It’s great for beginners. You don’t need experience, and you don’t need the qualifications required by most traditional lenders.
  • No (or limited) red tape. They won’t check your credit score, income, tax returns, or require an application.
  • It’s cheaper. There are almost never fees, and the interest rates are comparable to a bank’s (on the lower end for financing).
  • You can close quickly. You don’t have to wait for an appraisal to happen or for an application to be processed. Funding is a phone call away.
  • Do any deal. OPM lenders won’t have a box for you to fit in. As long as they get their return, most people could care less what type of property you invest in.

Why Would Someone Lend You Money?

Is it too good to be true? Why would a random person want to give you their money?

The thing about using real other people’s money is it’s an easy win-win scenario.

People with a lot of cash are always looking for a good place to put it, but:

  • Most people don’t want to be in charge of their own real estate investments.
  • Banks have a very low rate of return.
  • The stock market is unpredictable. (A good source of real OPM is older individuals who are nearing retirement. Stocks give a good rate of return in the long term, but when someone plans on retiring soon, they’ll be looking for shorter-term stability).

These people are looking for you as much as you’re looking for them. It’s just a matter of attracting (and keeping!) the right people.

Downsides of Other People’s Money

So, what are the cons to using real private money? There are plenty of positives, but it’s wise to be aware of some potential trouble spots:

  • It’s harder to find lenders. You can’t walk into a bank to get this kind of money; you just have to find the right individuals. Your OPM lenders don’t necessarily have to be millionaires, but they do have to have a good chunk of free money available for you. It can take time to find these people.
  • Keeping OPM lenders can be difficult. It’s takes a lot of time and attention to nurture your real private money lenders. You need to keep their money secure, pay them on time, and provide them with good opportunities. It’s best to have multiple OPM lenders available to you.
  • Finding other people’s money means selling the people on it. People who would most benefit from being a private lender might not even know what it means. If a doctor, dentist, teacher, etc is keeping their life savings in a bank account or IRA, then they might get a better return doing private lending. However, people outside of real estate might not understand how it works. It’s your job to explain how their money gets secured and how the process works.

The funding itself may be easier, faster, and cheaper, but with private money, finding and managing a relationship with a lender can be the hard part.

Just remember that anyone with money is looking for a stable return. If you can prove you’ll provide that, funding opportunities will start rolling in.

How to Get Other People’s Money

So how does the process work once you find other people’s money?

If you need help finding, attracting, convincing, or setting up an OPM lender, let us know. For the last 15+ years, we’ve raised millions and millions of dollars through OPM. Send us an email at Info@TheCashFlowCompany.com with any questions.

Want some more information right away? Download this real private money checklist for free. You can also check out the videos on our YouTube channel.

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Real OPM Benefits

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How can Real OPM benefit your real estate investments? Real OPM Benefits!

Here are the basics to get you started.

OPM. Other People’s REAL Money.

Not money from a broker or mortgage company or hard money lender. Money from real people to fund your flips and make your investments faster, easier, and more profitable.

Real OPM Benefits vs Private Money

What’s the difference between private money and Other People’s Money? Aren’t they the same thing? Yes and no. They’re related, but there are a few key differences.

Private money is often called “hard money.” It involves going through a broker or a company like Hard Money Mike that lends you private money.

OPM does the same thing, but it’s strictly peer-to-peer, person-to-person. It is private money because it’s a loan outside of a bank. It’s not hard money because you’re not going through a formal company or filling out applications.

What is Real OPM?

OPM is simple: one person has money and needs a smart place to put it, and one person has a promising property investment but no money to put into it. They form a peer-to-peer transaction.

Both people have the chance to benefit more than they would if they went through a bank. The person with the money gets a simple investment with typically a much higher return than the banks would pay. And the person who needs the money can get it cheaper, faster, and keep it more fluid. Both can end up more profitable and successful.

Taking the OPM route may feel non-traditional from a modern perspective, but historically, it’s the way things have always gotten done. One person has something, another person needs it, so they create a deal where they both benefit.

The Flipper’s Perspective

If you’re the flipper and you have an established relationship using OPM, funding purchases becomes simple. You find a property, and all you need to do is contact your OPM lender and give them details.

“I found a great property, but I need $100,000. We close in a week. Here’s the title company’s information. Please send the money, and we’ll get this taken care of.”

No applications, no appraisals, no middleman. It’s an easier way to borrow money, and usually less expensive than more traditional loans.

The Lender’s Perspective

If you’re the one with the money, you’re probably already looking for a smart place to put it.

Loaning the money to a flipper or other real estate investor will typically give you a better interest rate than a bond, CD, or other interaction with a bank.

How to Make It Work

It’s extremely important that OPM deals are set up to be win-win for both sides. The main reason people avoid OPM is the fear of deals going bad. This system breaks down if one side or the other feels the deal becomes unfair or unsafe.

Let’s talk about how to create a win-win environment.

Priorities for Each Side

Each party has to keep the other party’s interests in mind.

For the flipper, OPM needs to be easy, reliable, and quick. The flipper’s responsibility is to make a good and profitable deal with the other person’s money. If you do that, your OPM lender will always be there to help with your next deal. However, the second you “play games” with their money, the relationship ends, and you lose that source of fast, simple funding.

For the OPM lender, deals need to be secure and detailed. As long as their money is taken seriously, they will be there for the flipper. If you’re the OPM lender, you have to always fund a deal when you’ve agreed to. Don’t leave the flipper high and dry at the closing table.

Setting Up a Proper Real OPM Benefit Relationship

Using OPM may “feel” more casual, but it’s absolutely vital that you get everything in writing. Visit a lawyer, and lay out all aspects of the deal. Everyone will come out more successful if you’re diligent with this step.

Some of the things you’ll want to set up in writing are the following:

  • What is the repayment schedule?
  • What are the interest rates?
  • How long is the loan?
  • What’s the plan with the property?

The clearer, more open, and more detailed you can be with each other, the better the deal and your relationship will be.

The goal is for OPM to be mutually advantageous. People who have money want to find deals that will earn them interest. Flippers need money that flows better and is faster to qualify for. OPM is valuable, so take the time to set it up right.

Want More Details on Setting Up OPM?

Hard Money Mike doesn’t need to be involved with your OPM deals to offer help. We have resources to help you learn how to best set up OPM deals:

  • What should closing look like?
  • What are proper terms?
  • What documents will you need?

We want to keep things flowing in the real estate community.

Find out more on how to leverage up your real estate investments on our Youtube channel.

The Cash Flow Company can help you with private loans and all real estate investor loans.

We also can help you find and set up real private money from those around your area.

We scour 100’s of loan programs across the country every month locating the best investor friendly loans.

Real OPM Benefits

Real OPM Benefits

 

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