In these times, cash remains king in the real estate investment market. There is a lot of money to be made buying from motivated sellers if you have cash to invest. In today’s very uncertain seller’s market, cash talks while financing contingencies walk. There will be motivated sellers in every market. The typical motivated seller is in a hurry to sell and doesn’t want to take weeks and months to close the deal.
The secret is having a cash source that you can tap into on a day’s notice and not take weeks to close a deal. You need a funding source that will write a check on the spot for a great deal. You may be surprised to learn there are more of these people around than you think. Private investors are looking for passive income streams paying more than the 1% to 2% they can earn with bank CDs or in the money market.
These are not hard money lenders that can cost a lot to borrow from. These are rich individuals and people with self-directed retirement accounts. Not many people know it but it’s possible for individuals to manage their own retirement accounts and invest in real estate. It’s a great alternative to investing in the uncertainty of Wall Street or low interest bank options.
These people are savvy investors and are not going to give you access to their money without being sure you know what you are doing and understanding how you will repay them.
The five most important pieces of information they want are:
1. Exactly how you will invest the money.
2. How you will secure the loan or investment.
3. When they will be paid back.
4. How much they will earn on the loan.
5. Proof you know what you are doing.
The good news is you have enormous flexibility in how you structure these deals. For instance, if they are investing with 100% cash for the property, you can secure their investment by including them on the title as a tenant in common. Another way is by creating a mortgage that makes you the property owner and the private lender the senior lien holder.
Your investment strategy determines how the money will be invested, when you expect to repay the loan, and how much they will earn on the deal. Again, lots of flexibility. The private investor can earn a percentage of the profits or a straight interest rate or a combination of both.
Proof that you know what you are doing is simple if you have a history of successful deals. But not as easy if you are just getting started. In either case, the place to start is by putting together a presentation you can show to prospective investors. Make it a highly professional presentation with enough detail that the prospect clearly understands your investing criteria and provides the five pieces of information mentioned above.
Once you have everything in place, the remaining task is finding prospective private investors. You can run ads on websites like craigslist and look for private investment clubs. Also, search for self-directed retirement clubs. I seriously doubt you will have a better opportunity during your lifetime to create wealth by using cash to invest in great real estate bargains today.
Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.