Some Private Lenders aren't Worth the Hassle

 He who has the gold makes the rules, but some of these private lenders are getting ridiculous.

 

Bow before them my brothers and sisters, they are the Aristocracy of real estate investing.  They have cash to lend and question not their terms, timing, or commitment.  Take it and like it.

 

I had a deal that I just secured on Sunday.  It is an amazing deal.  This is a 4000 sqft home in Fairfax Virginia, just outside the beltway in an amazing neighborhood.  I have it under contract at about 50 cents on the dollar and I am putting $100,000 down at closing and I am paying the entire fix up costs out of pocket.

 

A broker whom I have worked with a couple of times had a private lender who was very interested in funding the deal.  I sent them all the information but told them that I was also working with another lender.  The broker told me that these guys are “businessmen” and that he doesn’t want to waist their time if I’m not positive.  “Ok”, I said, “if they don’t want to waist their time then I guess I’ll give this other lender the first crack at it.”  I mean if a “businessman” is not willing to compete for business then I’ll call them last, right?

 

But I did tell him that since I am putting in such a large amount of my own money then they should give me superior terms.  I told them if they could commit to lending at 12% interest and 5 points that I would commit to them.  The broker called me back and said they would do the 12% but he hadn’t heard about the points yet.  I guess with that the broker went full speed ahead.  I was not aware that we had a solid deal when the other lender gave me solid “written” terms and commitment at 4.5 points and 12%.  At that point I told the broker to hold off it looks like I’ve got a lender.

 

I can not believe the response I got from this broker.  He told me that I had wasted his and these private lender's time.  He told me that investors (like me, I guess) are a dime a dozen and that private lenders are rare.  This is a line I have heard in one way or another many times.  I told him that he was sadly mistaken if he believed that I was required to give him first right of refusal on any deal that comes along and then be obliged to swallow what ever terms they offered 2,3,5 days down the road on a fast moving deal.

 

Contractors, realtors, bankers, investors, everyone in real estate have to compete and beat their competition.  I can’t believe the attitude of some private and hard money lenders.  I can’t tell you how many times they have pulled the rug out from under me (a businessman) or wasted my time.  I say you don’t have to take it.  I recommend everybody read “Winning Through Intimidation” now entitled “To be or not to be intimidated” by Robert Ringer.  These hard money lenders are the ultimate intimidators.  I’m telling you right her and now, yes, you have to be professional and, yes, competent but if you are you can take a strong posture even with the all mighty private lender.

 

I have achieved a position in investing where I am not a dime a dozen investor.  I bring 100s of thousands of dollars to deals that are good enough that some people would finance them without a down payment.  I have a resume with many documented successful deals under my belt.  I have built a reputation as a deal closer and thus deals are finding their way to me.  I have three flip projects ongoing right now.  I could finance my own deals completely if I just did one or two at a time but I choose to leverage my money and I am willing to be very fair with lenders but I am not going to let them put their boot on my neck.

 

I recommend you live frugally, and work hard so that you can get to a strong position just as soon as possible.  Having at least a majority stake in your own destiny is the golden key to being successful in real estate.

 

For those of you who are going to comment that you don’t need my business because you have people lined up to take your money.  I say to you go ahead and lend to any Tom, Dick or Henrietta off the street.  Go ahead and stick it to us arrogant investors who get a few successful deals under our belts and then forget our place as lowly beggars and start thinking we deserve at least the respect of a professional.  If this is your choice then you better have the foreclosure process down to a science.  In the mean time, I could turn three to four deal while you mess around with a foreclosure.

 

For those of you who want to work with mutual respect as colleagues, partners, and professionals go ahead and give me a call.  I’ll make you some money.