3 Tips for Establishing a Solid Relationship with your Private Lender

A strong relationship is the foundation for any successful business venture.

Even if you’re new to real estate investing, chances are you’ve heard of private money lending as a way to fund your deals. While this form of lending is supreme, most fail miserably when attempting to attract potential investors.

To set yourself apart from the crowd, approach the situation this way: place yourself in the shoes of the private lender and consider what it is they may be most concerned with. In doing so, you will inevitably increase the odds of acquiring the private funds necessary to grow your business in ways you never thought possible!

For a quick breakdown, check out the 3 tips that are sure to make a positive impact on the relationship with your investor. If you’ve ever even considered working with a private money lender, keep reading for the skills to do so…

private lender relationship

Tip #1: Define the Lender’s Benefit

For a potential private lender to agree to lend you the funds you so desperately need to get your real estate dreams off the ground, they must trust that you can deliver on everything you say.

Trust is the founding principle of building a relationship that lasts the test of time. Once you get your lender to trust you, the climate completely shifts in your favor. Whereas before when you were judged for your possibility of failure, now you are deemed trustworthy enough to invest in.

At that point, the next step is clearly defining what the lender will gain from the partnership. More often than not, people will focus solely on how the lender can allow them more freedom in their business endeavors. This won’t lead to an open and willing investor but rather will scare them away and FAST!

If you plan to move past the initial phase of pitching your offer to a private lender, always remember to lead with how beneficial investing in you will ultimately be for them.

relationship with your private lender

Tip #2: State the Risks of Investment

While leading with the good is an easy way to attract potential lenders, the risks of what could happen cannot be left unsaid.

Certain things may even be out of your control and as a safety precaution, discuss every possible pitfall. Every investment comes with a level of risk and private lenders are aware of that.

What they want from you is the peace of mind that comes from a realistic understanding of the negative potential in the deal and that you’ve done everything in your power to limit that potential.

relationship with your private lender

Tip #3: Maintain a Realistic Plan of Action

You must have a plan and it must be written down.

This may be something that seems obvious, but it doesn’t hurt to reiterate that being prepared makes a world of a difference. Having a grand vision just isn’t enough to prove that you’re serious about making the deal a win for both parties.

One thing all private lenders want to see is experience or proof of legitimacy and authority.

No one wants to feel the uncertainty of being strung along on a new experiment, and this is the biggest hurdle for new investors to overcome. If you can show great results from your or your team’s hard work, the chances of your lender investing with you increase dramatically.

To recap…

Understanding the viewpoint of the potential lender is crucial in helping establish the kind of relationship that will allow you to surpass your business goals.

Just asking for their support isn’t enough to seal the deal. You also have the added task of laying out the good and bad so the lender can properly weigh their decision.

Focusing on what your lender can gain, rather than just what you want from them, is a foolproof way of showing your dedication to them. This will help to ensure them that the investment they’re making in you isn’t only logical but also highly profitable.


By Doug Smith
Founder of MyHouseDeals, Doug’s investing success allowed him to network with some of the greatest minds in business, and he’s been able to give back by sharing his investing knowledge to aspiring investors. To date, his investing tips and articles have been read by hundreds of thousands of investors. Although an active investor, Doug is most proud that he’s been able to transform people's lives by giving them life-changing advice and access to highly profitable investment opportunities through MyHouseDeals. And that this information has empowered them to make hundreds of thousands of dollars, quit their jobs, and most importantly, enjoy their lives with their friends and family. When he’s not investing in real estate, Doug enjoys traveling, softball, disc golf, and playing the guitar.
Categories:
Financing, Private Money

Related Articles