Private Money Lender pitch

[Evan O'Brien]

When seeking to obtain financing from a private money lender and putting together a pitch to present to a potential private lender, what documents should you provide and what points should you bring up to the potential private lender that’ll make them feel confident in providing financing for your deal?

[Tanner Cohen]

Hey Evan, 

When qualifying potential clients, as a private money lender myself I am looking for a few things:

1. What is your experience? - How many investment properties have you purchased, sold or are in the process of selling in the past 3 years?

2. What is your middle FICO score? - Credit score is not the main source of qualifying, but it is one piece of information that we look at when seeing if you are worth investing in.

3. How do you plan to hold title, in your personal name or a business name? - business vesting is preferred by some like myself because we provide business purpose only loans, while other lenders like to see you hold title in your personal name. 

4. What are your liquid reserves? - How much money do you have to be able to make this investment happen? Private lenders usually require 2 months worth of bank statements showing enough liquidity.
depending on your strategy you may need anywhere from 10%-30+% for down payment + closing costs and then enough left over reserves to cover 4 months worth of principal/Interest, taxes, and insurance payments. And if rehab is involved, you will need more reserves. 

5. Be completely transparent - communicate clearly with the lender you are speaking with about anything that they may uncover when looking into you and your investments(s). We will run your credit and go through your bank statements. We won't need to verify your income via W-2's and Tax returns, unless you give us a reason to require that information.

6. (most importantly) Where is your property located, what is the condition and What is the investment strategy you are looking to accomplish? - what do you think the property is worth aka what is the as-is value? Is rehab going to be involved? What is the ARV? How long do you plan to hold the property? What is your exit strategy? If your deal makes sense and there are recently sold comparable properties nearby then you will have an easier time finding financing closer or at your desired rate/ltv than if you have a property in a rural area with no comps.

SO to answer your question plainly, in order to make a private lender like me feel confident in you and your investment you will need to have a property, a clear understanding of the market that property is in,  (bonus if you have recently sold comps within the past 6 months w/in 1/2 mile of the property to provide up front supporting the property value you think), a clear vision for what your investment strategy is, supporting documentation to back up your ability to pay your loan, share your experience, credit score and anything you think they might uncover, and communicate clearly as to what you are looking for from your lender.

You have all that and the lender's you speak with will be chomping at the bit to work with someone like you who knows what they are doing and are serious about getting financing.

Cheers and happy hunting!