Finding Private Investors
What should my ad say when I am looking for privtae investors?
Earn 10% on your money backed by real estate. Call 555-555-1212
Has any one ran this type of ad before?
What made your ad get the best response.
I don't know if 10% will cut it.
If you are looking for a "Hard Money" loan, you are going to have to offer more than 10%.
Assuming you are going to use the money for flips/rehabs the percentage rate doesn't matter as much.
My advise would be to run an ad like this:
"Real estate investor seeks private investor(s) to fund real estate projects. Willing to pay handsome interest.
When they ask what "handsome interest" means, tell them it is negotiable. Ask them what type of return they want?
when I invest as a money equity partner I get 40% or more of the gross profit. If I act as a hard money lender I ask for 15% or more to be in 1st position.
First, your ad is trying to attract investors with cash. That does not mean you have to attract the RE investors who might be using a forum like this, etc. By this I am implying you want someone who has cash but does not know they can make 15% or more.
The ad is for the older person sitting on cash who is earning 4% in the bank. You want to offer them a better deal. They will be happy with 8% and might even think 6% is just fine.
Do not be too specific with numbers in the ad. In some states there are limits to what you can advertise. 14.9% is the limit for one. Check around for the state you are running the ad in or leave out the number. The laws normally apply to more then just the ad so even doing a deal at a higher rate might be an issue. Granted, the laws normally do not apply that much when you as the borrower are suggesting the rate or if the property is an investment property. Check the usury laws.
Yes, the pro's who tend to look similar to the users of the forum are used to 15% or higher. Such folks know the deals they can do and do not want to tie up their funds with a low rate of return. Horses for courses is how the British would label it.
I do get investors replying indicating that they will lend for 8% (and some higher). I also do deals when I get more then 15% after you calculate the yield (note rate, any discounts, payment history). The ad is to find the folks who are happy with a single digit return.
Keep your deals really clean, simple and with conservative LTVs when borrowing from the public at attractive rates. Have a loan servicing agent (LSA) collect the payments so the records are clean and at arm's length. John Locke recommends one that I use.
If you need to push the LTV to something that is pretty high (over 70%) stick with the pro lenders who know what they are doing.
If you get into trouble and you have been borrowing from little old ladies and not being wise with how you do things it can get very nasty (time in jail, etc). Protect the naive from aggressive deals is the message.
John
[addsig]
great post!!!
where might one find a loan servicing agent?
This is guru B.S. You must find your investors via word of mouth, otherwise, if a deal goes bad, and your investor digs deep enough, they can nail you on soliciation and securities violations
No public solicitations, has to be word of mouth.
Not that people don't do this and get away with it, many do, but you are taking a BIG risk
Can you elaborate a little bit more on what youare talking about Dave? How is advertising for partners or investors illegal? I mean that is what I am getting from your post?
[addsig]
I agree with Dave. You are running a huge risk advertising a percentage rate. You could get slamed by the SEC and state regulators. There are serious laws concerning advertisments that show a return rate.
You might also run into FTC regulations because this is a business deal. Depends on how they view it, they have been witch hunting lately and have been quite successful in locateing and prosecuting scams. Not saying that is what you are trying to do. What you are trying to do and what they see are going to be two completely different things.
The way this is reading you are makeing a guarantee of 10%.
My advice is rethink your approach. Don't do this. The risk is high and you could face huge fines and possible jail time (for a long time). Don't do it.
Does anyone see a problem with the way pmh suggested advertising?
"Real estate investor seeks private investor(s) to fund real estate projects. Willing to pay handsome interest.
newbie here so dont get offended by rediculous questions everyone should know. i dont '-' for dave are the rules south of the border different than north of it and do you know the rules on advertising here in Canada?
Thx :-?
[addsig]
Any such ad is a bit of a minefield as this thread has highlighted.
I disagree with some of the comments as to where the lines are.
Private conversations can be just as much a violation of securities law as public solicitations. How you attract the clients is just an indication of a possible violation, It is not the proof of the violation. There has to be other elements. It is not the running of the ads it is the collecting of the funds and how the funds are handled. Too many people in one deal even if you spoke with them all privately is a violation.
The key to RE transactions staying on the safe side of the securities regulations is to make sure you are doing a RE transaction.
Bad would be where you get people to put funds together into a blind pool is one example.
There are other rules that apply to the interest rate and these rules have nothing to do with the security laws.
Bottom line is if you are not sure seek legal advice. If you are sure, seek legal advice. Expect to get different answers some of the time so go with a firm that has experience in the area and is bigger enough to have lots of assets they care about.
This forum is not the place to get legal advice. We all make mistakes and even if something works it does not make it legal.
Worse yet is when you did something legal and the other side's lawyer was just sharper so you still have to suffer the damages from a suit.
John
[addsig]
It seems that I have open a can of worms. It sounds like you cant even owner finance a house because there is a interest rate. There are many private real estatet investors that advertise looking for private loans. Here is a web site that a investor raised over 1 million dollars after talking to his first two investors and sells all the info. on how to do it. http://www.privatelendingmadeeasy.com/products/
I would buy the course but I thought that someone had done this type of advertising before and could help me out. All the big real estate guys talk about using OPM (other peoples money) and they say that they are not talking about banks or hard money lenders but private investores.
:cry: [ Edited by joelmi on Date 09/22/2004 ]
So, if you shouldn't place an ad to find private investors, how do you find them to talk to them? I'm a newbie, with no RE contacts. I feel like I'm lost.