Be Careful if You're Buying Into "This" New Private Money Fad

Before you read this, I have a little exercise for you.

First, go grab a big wad of cash.

(If you don't have a big wad of cash, hop in your car and go to the ATM machine. I'll wait.)

Now, once you've got this wad of cash in your hand, grab a lighter and set it on fire. If the flame gets too hot, throw the money into the toilet and then flush it.

Watch your money burn and then watch it go down the toilet.

In a small personal journal, describe your feelings as you do this.

End of exercise.

Why have I had you do this little exercise?

Because I want you to know what it feels like to needlessly burn money.

And that's exactly what you'll be doing if you aren't careful buying into the latest fad out there for raising private money.

Maybe it's not a fad.

Maybe you haven't bought into it. Perhaps you have.

I"m talking about getting lists from public records of people who (supposedly) have made private mortgage loans. The idea is: you get this list and send them a letter asking them to be your private lender. The rationale is that the person you are mailing is likely to loan you money because they (again, supposedly) have made a private money loan before.

On principal, the concept of this is not all bad. I can see the logic, although it is a bit flawed.

However, like always, it is the implementation of the idea that counts -not just the idea.

And, the implementation of this idea that I have seen has been downright laughable.

How do I know this?

Because I have been the recipient of hundreds of these letters!

How have I done this?

Because all of my private mortgage lenders have my business address as their "draft & return to" address on their mortgages (this is the address that goes into public records as the private lenders address).

Why have I done this?

Precisely because I don't want other nosy real estate investors learning who my private lenders are!

Hopefully you'll take the same precautions with your lenders. Once you earn funding from a private lender, you don't want them getting bombarded with letters from people all over the place promising them 20% on their money. First of all, it's annoying to your lender to receive this mail. Second of all, let's say one of these other real estate investors hires a guy like me to write a their direct mail campaign...now you've got a real problem because your lender might jump ship.

Ok....back to what I was saying...

This fad of buying a list of recorded mortgages (or trust deeds) is a pretty rock-headed way to do things. Even thought it's been passed off as the latest and greatest.

Why does this method stink?

2 Reasons

1. Because you can get better mailing lists!

A good mailing list is an important fundamental in direct marketing. If you don't have a starving crowd, forget about selling hamburgers. In terms of buying these private lender lists, you can do better than what you've seen on this.

Talk to a good list broker. Describe your ideal private lender prospect in detail (age, income, investing experience, etc.). If you can't describe your ideal lender prospect, don't even think about sending a direct mail piece. Why? Because it will miss the mark.

You can get mailing lists that have names of accredited investors who have over $1,000,000 to invest and who are actively looking (this is a big key) for direct participation programs (like yours) to invest in. You can find out more about them than you'd almost ever care to know.

Just about all of the mailing lists offered for this new fad are compiled lists versus lead generated lists. This is a night/day difference. Compiled lists generally stink.

2. If you don't write good copy you might as well burn your money (hence the exercise a few moments ago).

I know I've said this before, but it's worth mentioning again: never waste a chance to make a sale. Doesn't matter if you're selling in person or if you're selling through mail or via internet. If you get the prospects attention (e.g they've opened your letter) then you have only one chance! Make it count.

Unfortunately, exactly ZERO of the mailing pieces I have received that were intended for my private lenders have had anything remotely close to resembling good copy. Most of it has been downright awful.

Here's a snippet from one of the letters:

Dear Mr. Smith

Public records show that you recently loaned money on a private mortgage. I currently own a real estate investing business that buys and sells houses. You can lend money to me instead! I will pay a great rate of return and you can make more than you can in the stock market right now....

Blah...Blah...Blah

No, I am not making this up. You just can't make this stuff up.

Please follow guidelines for good sales letter copyrighting if you're going to do mailings. The old: AIDA format (attention, interest, desire, action). Make it about "them" instead of about "you" (e.g. stop using "I" and "we"). Use a headline. Etc.

While I applaud the effort to even drop the letters in the mail (most people are happier watching DWTS), I can't help but to feel a little bit bad. Somebody got duped.

Hopefully now it won't be you.

-Happy Investing