Epic Real Estate Investing - Private Money Tips for Creating an Unlimited Source of Funds | 369

Episode Date: April 6, 2018

This Financial Freedom Friday, Matt gives you 5 private money tips that will solve your real estate investing money problems for good! Learn how to get meetings with private money lenders, the extremely successful line Matt used (and still uses!) at the end of meetings with lenders, the 3 things going through a private lender's head when you ask them for money (and how to address them), and much more. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey y'all, Matt here. It's Financial Freedom Friday. It's time for Financial Freedom Friday with Matt Terrio. I was thinking of what we're going to talk about today. I stumbled upon an old video the other day. I don't know, it was yesterday. Actually, not too long ago. Inside the academy, I'm doing a lot of cleaning up in there, doing a lot of updating and upgrading and trying to just make it a better place to be and a better place to learn. What I'm finding is there's not a whole lot to clean up. I'm in there cleaning up some old links and stuff like that. Found some typos. But as far as the message, The message hasn't really changed.

It's all the same. It's really time-honored messages inside the academy, and it's the way it's always been, and it seems like it's the way it's always going to be. Certainly from five, six years ago when I opened up the academy, it's about seven or eight years now. When I opened up the academy, what it is today, I don't have anything really new to share.

So I thought I'd just share this lesson with you from the Epic Pro Academy. Hasn't seen probably the light of day in six or seven years, and, you know, the message is just as good today. as it was then and I'm about 30 pounds lighter in this video too so I thought I'd show myself in my most favorable light all right enjoy take care okay so if you can't get all the money that you need from the seller and the buyer nor the tenant were able to close that gap for you the next place you can look is a place called private money now private money is pretty much just that it's money that

can be loaned to you by either a private individual or a private organization. And private money could come from, say, a personal relationship that you have, or a family member, or a private company that actually specializes in those types of loans. But for the purpose of this session, I'm really referring almost exclusively to an individual, someone that you already know, or someone that you will meet in your real estate investing journey. And to keep your eyes open for the right person, the good candidates, the best candidates to loan you their private money, would consist of just about anyone that is dissatisfied with the current return on their investments of which you could offer them a higher return. Now, in the beginning, private money was tough for me to access. It was really tough.

However, after I learned a few things, it became easier and easier, and now it's really easy for me to get. And I'm going to let you in on my five rules for dealing with private money lenders. And if you follow them, private money will eventually be very, very easy for you to get as well. In fact, if you follow these five rules, I mean, money really should never, ever be a problem for you again. But before we go over them, there's some things to do and understand first. If you're brand new to real estate investing and you haven't completed a successful and profitable real estate transaction yet, no one's going to lend you their private money. They're just not.

I mean, you may get lucky with someone from the three F's club, friends, family, and fools. But outside of that, no one is going to lend their private funds. to an inexperienced real estate investor. So getting some experience under your belt and closing some deals with some of the strategies that we've discussed up to this point, that's going to be priority. You want to close some deals. But once you've got some deals under your belt, or maybe you already have plenty and you're not new to real estate investing, but you've never used private money before.

How do you go about getting that first private money lender? All right, so there are probably many ways to do this, but this is how I did it. I mean, I knew just from my sales background that for someone to do business with me, let alone give me a large amount of money, they'll first need to like me, trust me, and have confidence in my competence. And I believe we've discussed that dynamic in a previous lesson, right? Yeah, I think I remember that somewhere. And just like with a motivated seller, you've got to build rapport.

They've got to like you, trust you, and have confidence in your competence. And it's the same formula. I mean, first, to get people to like you, you must first like them, right? Simple. I mean, if you want to be interesting, you must first be interested. And do you remember how you do that? You just listen to people. Stop talking so much. Just listen. People like to be listened to and people like people that listen to them. All right? Second, to get people to trust you, remember how you do that? Say what you're going to do and then do what you say. Very simple too. And third, to get someone to have confidence in your competence, this is my favorite, and it's probably the easiest. Don't keep your victories a secret.

Let the world know about your successes. But only when they ask about them. Don't walk around bragging and boasting. That could have the opposite effect, and we don't want that. People ask other people on a daily basis something to the effect of how's it going or a simple, what's up, right? When you hear that, that's your cue. If you adhere to these three principles of creating likeability, trust, and belief in your competence, it's only a matter of time before someone asks, and this won't take that long, by the way,

it's only a matter of time before someone asks you out for coffee or lunch to pick your brain. It's only a matter of time because you are now likable. You are trustworthy, and most of all, people will have confidence in your competence. And when this happens, this is your opportunity to find private money lenders, especially your first one. So take up everybody on their invitations, except all of them. I mean, first, you get a lot of free coffee and a lot of free lunches. That's a very cool part. And second, more importantly, you'll get to answer all of their questions to first further convey

your competence. And second, to help them out as much as you can. That's what people should do for other people. And don't hold back, no secrets. Let them know everything that you know. And just about when that meeting is over, you might say something like, well, here's what I said, and I continue to say it because it works. So Mary, I mean, you probably wouldn't be asking me all of these questions if you didn't plan on profiting from it in some way, right?

And if you plan on doing that, you probably have some sort of resources to pull it off. What are you working with? And she might say something like, I've got $100,000 and your response is going to be. I tell you what, why don't we partner on a deal? You put in the $100,000 and I'll put in the rest, and you can do the deal right along with me. You can take notes and you can learn firsthand how it all works. And at the end, you'll get your $100,000 back, and then you and I will split the profit. Does that make sense?

So that's how I got my first private money lender. And three years later, that person still funds some of my deals. I mean, she's moved on to other things, but she still loans me money and continues to introduce me to her friends who have money as well. And now I have several private money contacts now, but it only takes one. And actually, if you follow my five rules, you probably will only need one. So while you're going on about your business, focus on the business. three practices of getting people to like you, trust you, and have confidence in your competence. And for you to be competent, remember, there's no way around this. You must be doing deals.

And you must be doing them successfully and profitably. Don't skip that part. And if you haven't completed a deal yet, or you're not doing them consistently or on a regular basis, that should be your focus right now, not how to raise private money. But once you are doing deals consistently, everyone around you, everyone around you is going to begin to have confidence. it's in your competence, whether you're really talking about it or not. There's just something kind of magical that happens. And, I mean, I use that word magic because sometimes there's no explanation for it. And oftentimes it appears to be magic.

But people are just attracted to people doing good business. And people want to do business with people that are doing good business. Like, lend them their money. Now, I have five specific rules about playing the private money game. And if you break them, you're going to get kicked out of the game. I promise you, okay? You've been warned, so break them at your own risk. Rule number one, always pay your private money person back when you said you were going to pay them back.

If you do that, you won't have money problems, ever. And I mean, pay them back even if your deal was a dud, even if you lost money. You figure out how to pay them back and pay them back on time. And do it with a smile on your face. I mean, even if you have to miss your own rent or mortgage payment, you do it. You got to sell the ski boat, do it. Sell the flat screen TV, pay them back. Work an extra job, do it.

I don't care what you have to do. Do it. Your real estate investing future depends on it. Well, at least with regard to using private money, it depends on it. And here's why. Word travels fast and your reputation is everything in this business, especially when it comes to private money. I mean, you might be able to talk your way into a second or third private money situation,

but if you're not keeping your word and you're not performing for the agreements that you put in place, it's going to be a very short investing career for you using private money. Rule number two, do not share your horror stories with your private lender. I mean, even if you paid them back, they don't need to know how close your deal was to collapsing and how close you were to losing all of their money. Keep that to yourself. Rule number three, if after someone has given you their private money and your deal isn't going as good as you thought it was going to go, maybe you might find yourself in a little bit of trouble and it's going to result in you possibly coming up short or late on your payment to them don't take your problems to them don't call and make excuses don't try to renegotiate always go back to the seller and resolve your problems and issues with them and if you can't resolve it there figure out a solution figure it out figure it out without involving your private money lender you see you want to make this such a pleasurable experience for your private money lender so the next time they'll have no

No issues or nothing to consider when you ask for a loan. Going back to the private money lender for a solution is always last resort. Rule number four, don't make your private money lenders have to chase you. Don't put them in a situation where they have to call you and ask about the payment that you have yet to make. Be proactive in your communication with them. For example, if you happen to drop their payment in the mail on the day that it's due, call them and let them know.

hey, I just overnighted your check. You'll have it in the morning by 8.30 a.m. Maintain that type of integrity and courtesy in your business, and your business will be a business. Not an annoying pain in the ass you have and you dodge phone calls all day. Rule number five, don't take a private money loan unless you know exactly how and when you'll pay it back. And you do this by first, placing your focus on finding the deal. Worry about finding the money later.

I've learned and learned and learned that it's easier, infinitely easier to find the money for your deal when you actually have a deal than it is to do the other way around. And second, you've got to know your exit strategies and you've got to know them well. I mean, I dedicated an entire session to exit strategies in a very elementary way so that you are crystal clear as to how each exit strategy works. You've got to know how you're going to get out of your private money loan before you get in there. it. Follow these five rules and money will never be an issue for you inside of your real estate investing. In fact, follow those five rules and you will receive phone calls from people asking, hey, can I get in on your next deal? That's a promise. All right, let's say you've got some deals under your belt and you've got at least one person willing to loan

you their money on a deal. So let's go over how to present your proposal to your private money lender. You'll want to know that there are three things going through a person's head when they're about to loan you their money. And when asking for a loan from them, you must address all three things. The first thing going through their head is, when am I getting my money back? The second thing that's going through their head is, how much am I getting back? And the third thing is, what happens if I don't get it back when you said you'd give it back? The more thoroughly you can address those concerns when asking for private money, the easier that money will be for you to get. Okay, first, when am I getting my money back? You've got to be clear about your extra strategy.

I mean, whatever you think it's going to be, double it. I mean, it's better to give them their money back early than it is late. I mean, if you have it figured as a three-month fix and flip, borrow the money for six months. Second, how much am I getting back? Well, this is really easy to figure as when you analyze your deal in the Epic Analyzer, there's a place specifically for this. Just scroll down to the last third of the page or so, and under the section Money Costs, there's a place for a first loan amount and a second loan amount. So let's say you already had the money for most of the deal, whether that was seller financing subject to or maybe you're using your own cash for most of the deal, which is allowed. I know we haven't

covered that at all, but it is allowed. But let's say you're $50,000 short. You'd enter $50,000 here, then how many months you'd need it for here, and at what percentage rate you'd pay your private money lender here. Now, if you're going to give your private money lender some money up front, what we call points, and they are percentage points, you'd enter that here. Then you'd then scroll down, click calculate, and that private money loan is now figured into your deal. And as you can see here, it calculates those costs into your suggested maximum finance offer. Doing it that way, you know exactly how much you'll be paying back your private money lender. And you know you'll be able to pay them back without it impacting your minimum deal standards.

Now third, what happens if I don't get it back when you said you'd pay it back? Well, this is pretty easy too. In the contract, you write a simple late payment penalty. That's simple. And for their security, I'll typically record their loan referred to as a promissory note. I'll record that note with a trust deed or as a lien against the loan. the property so that my private lender actually has that real security. Basically, I mean, if I don't give them their money back, they get the property. That's pretty secure. It's more

security than the stock market is giving them. So when asking for a loan, make sure you cover those three concerns for your private money lender in your initial request or presentation. And here's why. The best way to handle an objection is to handle it before it ever comes up. This podcast is a part of the C-suite radio network. For more top business podcasts, visit c-sweetradio.com.