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How to Not Screw Over Your Private Lenders…So They Beg to Do More Business With You

You usually get one chance to prove your value with a Private Lender. Treat it like Gold, and they’ll beg to do more business with you.  Screw them…and you’re finished.

My first private lenders were family and friends.  They saw a lot of the deals I was working on with my real estate investing first hand, and realized their money was actually more secure with me, than sitting in their stock markets.

Over time as more deals were completed, various individuals have contacted me from my “We Buy Houses” classifieds, word of mouth, etc.  In the past 3 weeks, I’ve had 3 different people contact me wanting to loan money for various projects.  Unsolicited.  Please understand, this stuff doesn’t happen overnight.  It happens over time.  As you build credibility and run ethical business, people will see that in you, they’ll trust you, and want to work with YOU.

However, here’s a couple pointers that I’d like to mention.

1) LENDERS COME FIRST:  You always have to pay your lenders back.  If you do a bad deal, something goes south, and your profit margins fizzle, you need to pay them back first.

2) REWARD THEM:  If it’s the first time you have ever worked with a certain private lender, treat them like Gold.  Think of how you can step out of the crowd.  Possibly include a gift card for a restaurant along with your first mortgage payment to them, along with a thank you card.

3) PREPARE A PACKAGE:  Once you have completed some deals, have a little binder put together that contains some of the project you’ve completed.  This will help them to visually see that you know what you’re talking about.

4) PAY ON TIME: This really doesn’t need to be said, but I know far too many private lenders who unfortunately, have been screwed by investors.  Don’t make them call you to check on the status of a payment.

5) DO WHAT YOU SAY:  Be your word.  In this industry (and the whole world), we’re really only as good as our word.  If you tell your private lender they are going to receive X, and that you’ll have these repairs completed by this day, etc…do it.  Pretty simple.

6) PROPERLY COVER THEM:  I know a lot of investors would try to look out only for number one.  That’s NOT a good way to look things.  That is how a lot of my tenants in the past have handled their money matters.  They’ll pay their cable bills, pay for their Coors Light party packs, and have $1,000 worth of toys for kids at Christmas, but won’t pay their housing provider on time.  THAT is why they’ll be life-long tenants.  I make sure my private lenders mortgages get recorded.  I’ll make sure there is clean title to the property.  I’ll make sure there is an insurance policy in place covering them in case the place burns to the ground.  I’ll make sure they receive every penny they are owed…no matter what.

7)  PROVIDE SERVICE TO THEM:  I routinely tell my private lenders that if they want to know my thoughts on other investors…to call and ask me.  I’ll be straight up with them.  If they want to know my feelings about what a house is worth that they’re considering loaning for another investor…I’ll them.

It’s things like these that can help separate you from the crowd.  Going above and beyond.  Be a servant.

Do you know anybody who has messed this up?  If so, let me know below.

Thanks,

Brandon

Photo Credit: Images Money

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