How do you find private lenders? The best way is by spreading the word. Get some business cards, put together a credibility kit (who you are, what you do, pictures of properties that you have rehabbed or flipped, etc.) and start spreading the word that you help people earn higher returns on their retirement money, fully secured by real estate. Tell your doctor, dentist, lawyer, accountant, family members, friends, neighbors, anyone you can think of who might have some money in a savings or retirement account.
What kind of returns should you offer? More than banks pay, but low enough that you can still make a profit. If you’re a rehabber, and you only need funds for 3-6 months to purchase and rehab houses that will be resold, then you might have to offer higher returns (10% to 15% APR) to make up for the quick repayment.
If you need funds long-term (5-10 years) to buy and hold rental property, then you’ll only be able to offer a return of 6% to 7% (double the rate for 5-year bank CDs). Make sure the loan payments are interest only to improve your cash flow and make the accounting easier. (Most private lenders prefer this anyway, as it means that all their money is earning interest.)
The rates you will have to pay for private money will depend on your track record, your relationship with the private lender, and your negotiating skills. As you gain experience, the rates you pay should be going down because you will have multiple lenders to pick from. Make them compete for your business by lowering their rates.
We hope this information will help you in your acquisition of investment property in Portland – and achieving financial independence. For more information on private money and private lenders, see our private lending website at A-1PrivateLending.com.
