What makes a private lender partner with a Newbie flipper?

Question

With no experience and no money, we will obviously need to get creative with our financing! I keep wondering, what will ever make a private lender want to trust someone so new to real estate, with no portfolio or money to back themselves up? Is it purely networking and knowledge-building that will gain me their trust? What will make me stand out and have integrity with a potential private lender?

Steve Hall · Answer

@Casie Nicholson Impress them! If you sent me a 15-20 page PDF with your personal income statement, employment status, education, skills, the property or properties you are considering, your calculations and projections, your rehab estimates from contractors, local comps, appraisals, estimated ARV, what you plan to list it for, who your realtor or broker is, your 5 year plan, etc. I would definitely be impressed and consider funding your project. Make sure your document includes how much you intend to put down, and includes the source of funds with verifiable documentation.

I might ask questions like, why flipping vs house hacking, SFHs or MF? How long have you thought about this? What have you done to educate yourself on flipping?  How much work do you intend to do yourself? If all of this is already answered in your PDF, you'd blow me away, and I would have to look for reasons to say no, rather than look for reasons to say yes.

BTW, I just re-read your post... If "no money" literally means $0, then don't even consider talking to a private investor. Start saving $1,000 a month, and plan to start your investing in a year.

Eric M. · Answer

Find a flipper in your area whose work you like and who does the type of projects you want to do. Offer to be their unpaid intern/personal assistant. Commit to some length of time, like 3 months. Or one project or something.

What you learn in that time period and the people you will meet will go a long way to getting started and getting some credibility.

Bob Woelfel · Answer

@Casie Nicholson start saving some money and get educated.  It's pretty difficult not to mention extremely risky to start this with $0.  Get your personal financial house in order first.  This is a long term play.  Sell some stuff, cut back on expenses, pay off debt, save money, etc.  Don't be in a huge rush as you have to learn the process.  I would read @Steve Hall's post about 20 times.  If you are asking people to believe in you and trust you then you better come to them with a plan.  You better know what you are talking about and you better know your numbers.  The first flip I ever did was with a private lender who was not a family member or friend.  I met her through an acquaintance and I was able to impress her enough with my knowledge and plan that she agree to work with me on a project.  I was a licensed agent, I had previously done a live in flip where I did almost all of the work myself and I had a separate full time job that paid me pretty well.  I had a number of things going for me that made me less of a risk.  Good luck.

Jay Hinrichs · Answer

first thing is to get a real estate license so you know the industry..  other wise your description above is a non starter except for close family and friends.

Frank Geiger · Answer

1. Know what you're doing. Don't fake it. It will only damage the relationship.

2. Have a killer deal (have handout if necessary).

3. Partner with an experienced investor. Kinda like building your resume.

4. Secure the loan with the property.

Private investors outside your inner circle will likely not want to lend to you. But if you can provide a joint partnership agreement with a credible individual, you may find someone willing to work with you.

Garrett Ellison · Answer

Jay, I normally 100% agree with your posts, but I completely disagree that the FIRST step is getting your realtor’s license.

I think you can just as easily learn the ins and outs of real estate by hanging on here, listening to the podcasts, and attending networking events.

Jay Hinrichs · Answer

also thankfully they took Morris invest podcast down  LOL

Jay Hinrichs · Answer

Ya I hear ya if you have some money to operate.. but the license you get on a big team and you can actually make money while you learn. this is specific for those with little operating cash.. And I guess to be quite frank that's what I did when I was 18 and living at home.. it opened up all sorts of doors.. No way I could have had this career without the license.. but I realize things are different now of course.

Jay Hinrichs · Answer

I think very few folks starting out could have much of what Steve is describing. I have been lending money for 3 decades and have never seen a file like that for a HML  ..  I create those kind of submissions for my big bank loans though.. but most folks wont have a balance sheet or a P and L as they are starting out..  One thing I have and really like is I have an intro letter from my Personal Banker of 25 years that really is a good one to lead with..  short description of what I have done.. my average balances at the bank.. projects I have helped the bank work out of that sort of thing.

Grant Rothenburger · Answer

"It's not always what you know, it's who you know" applies here IMO. PML's typically are savvy investors, they will not hand over money to someone with 0 track record, unless you have a good relationship with them OR have strong word from someone they respect.

Other than building a genuine relationship with potential PML's, if you find an amazing deal and can communicate a good level of knowledge, they may lend to you.

What makes a private lender partner with a Newbie flipper?

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