Why private lenders don’t answer your calls [3 Mistakes]

The process of trying to get private lenders to return your calls can be extremely frustrating if you aren’t approaching it correctly.

This is something we hear a lot in the real estate investing industry—someone gets a hot lead for a potential private lender and then…

{{{Crickets}}}

There’s actually a few very specific reasons this happens, and we’ve outlined tips that can get you on your way to creating this solid relationship. That’s exactly what it is: starting a new relationship from ground zero.

Are you ready to master the ins and outs for creating a long-lasting relationship with a private lender? There are three precise reasons why private lenders don’t answer your calls…

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Mistake #1: You’re Asking for Money

Is asking for money the first thing that comes up when you contact a potential private lender?

If it is, stop it.

(P.S. Not only does it give a bad first impression, but it’s also illegal.)

If you just met a new friend and don’t yet know them very well, would you ask them for money to help you out with a big purchase? It’s highly likely you wouldn’t. This is the same line of thinking you need to have when contacting a private lender.

INSTEAD: ask what they are looking for. Ask what their terms are, how much they have to lend and find out how much experience they have. Private lenders have preferences and knowledge in different areas (just like you probably do). They’ll agree to the deals that are right for them. If you start out by getting them talking about what they like to do then you can see if 1) they’re a good fit for you and 2) you’re a good fit for them.

If they’re new to real estate investing, then your “sales pitch” to potential lenders involves educating them—not asking for money. By positioning private lending as an opportunity and showing them the benefits and risks associated with real estate investing, you position yourself as an expert and exude trust.

After you dig and find out their likes and dislikes, it’s your turn to educate them. Talk to them about your experience and any deals you’ve done, and let them know the parameters you’re generally looking for. Keep it short, skim through the facts and get their thoughts.

You definitely should have an idea of what you’re looking for with your deal, but it’s important to find out their terms. In order for this to work both parties need to agree to the terms. Knowing the private lender’s terms in the beginning will solidify if this is the lender for you or not.

private lenders shaking hands

Mistake #2: There’s No Established Trust

The cornerstone to any relationship is trust.

If there isn’t trust built from the beginning it’s hard to go forward with the relationship—and this applies to private lending and real estate investing.

Most private lenders are individuals who saved money over time—through retirement accounts, disciplined savings, or even real estate investing themselves. So when they decide to lend money to an investor, it has to be built on a foundation of trust because quite frankly, they’re entrusting part of their livelihood to you.

Private money is all about relationships—it’s not like securing a loan from the bank.

When you have the mindset going into it that you are there to first build a relationship, you will be much more successful.

private money terms

Mistake #3: You’re Too Green

To clarify: you do NOT have to have done a deal in the past in order to secure funding from a private lender.

But you DO need to know what you’re talking about… And it has to come through when you talk to potential lenders.

Real estate investing and financing terms are confusing and it’s best that you educate yourself before talking with a private money lender. You should know the differences between private and hard money, flipping versus rentals, short-term versus long-term.

You don’t have to have a deal under your belt, but you do need to be competent in how to do a deal or work with someone more experienced.

private lenders

Get To Work Finding Private Lenders

Success raising private money for your deals depends on your ability to build and nurture relationships and trust.

Make sure to focus on providing value to your lenders. Try to educate yourself with the massive amount of free resources on the web. Build your network, attend meetings, associations and conferences. The more you do and learn, the better off you’ll be in your next great deal.

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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.

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