Where to find your private money lenders

By Gregg Cohen

In my last blog post, I shared with you the mental shift our team had when it came to focusing on raising private money to grow our real estate business. Basically, we realized the way to grow our business and the number of transactions we can handle each year was not by working harder….it was by building our network of private money lenders so that we could do multiple transactions at the same time.

So, the next question I always get when teaching about raising private money is this….where do you find your private money lenders?

We raised just about $3 million in private money just in 2009!

And my answer to our students is this….you’re already eating dinner with most of them!

Here’s the deal. When we started in real estate, we were 23 and had no real estate experience and very little money. My business partners and I all come from very modest, hard-working backgrounds and our families are not wealthy. But that hasn’t stopped us from raising over $4 million in private money to do our real estate transactions…and most of that has come from the people we are closest with!

We have never once sent out a piece of marketing to solicit private money lenders. We have never once held a seminar with the purpose to raising private money. All of our private money lenders have come through our relationships with friends, family and our colleague in the real estate business. And that’s the way it should be for you too! (The SEC has rules against marketing for private lenders anyways, so be careful about that.)

One ninja trick we used to raise private money when we got started was we allowed our lenders to lend small amounts of money to get started. In the beginning, we would let people invest with as little as $10,000. One thing we found is that when you let someone invest with a small amount and you return their money after the transaction is complete, they ALWAYS come back to you the next time ready to lend.

Only this time they have more money to lend! For us, its the rule of 3. If someone initially has a certain amount of money to lend, just assume that they really have about 3x as much available. All you have to do is prove it to them once, and then the rest of the money will be available next time!