Over the past couple of weeks, we’ve been talking about leveraging other people’s credit and capital to help you acquire real estate investment properties.

There are individuals and business ventures with money to invest or lend who are looking for high-return investment opportunities such as yours – aka “private money.”  How can private money fit into your real estate strategy?

• Look for private money terms with the flexibility to be tailored to your project cash flow.  For example, you may want an agreement deferring all profit-sharing, return of capital or loan payments until after the final sale.

• If you prefer to borrow so the property title will be in your name, but don’t qualify for formal bank and institutional loans, a loan contract with a private money lender can be easier to negotiate and close than a standard mortgage loan.  There are no bank requirements, so due diligence on your finances is at the discretion of the lender.  The same is true for the structure of the down payment (if any), loan payments, and all other aspects of the loan.

• Another aspect of private money is that it is “off the books.”  Because private lenders are not part of the banking and institutional financial system, their experience with a loan is not reported through formal channels.  It won’t help your official financial record or your credit score, or hurt it, either.

Where can you find private money?  First, check in with your local real estate community to find a real estate investment club of realtors and investors looking for sound projects like yours.  Explore other channels for private investment firms and joint venture groups interested in real estate investing opportunities.

Have your project plan ready to present in a business-like way to savvy investors you may be meeting for the first time.  Be prepared to demonstrate the economic soundness of the project and your credentials.  Explain how the investor will get their money back, along with their profits, and what safeguards are in place.  Private investors will want to do their own due diligence, so be prepared to provide the requested information promptly so you can keep the deal moving.

Private money is your alternative to the formal banking and lending structure for raising money to invest in real estate.  Although private money may come from family or friends, there are individuals and business ventures who offer money to high-return projects as a short or long-term investment.  If you have more credibility than credit score or capital, private money is an alternative channel to explore for financing solid investments.

What experience do you have working with private lenders?

For more information on how you can escape the rat race for good and create lasting, generational wealth with real estate, download my FREE ebook, “How to Find Underpriced Properties: Secrets for Creating Wealth with Real Estate in ANY Economy.”