Today’s REI Classroom Lesson
H. Quincy Long provides 10 tips for you to take advantage of when using private money for your investment deals.
REI Classroom Summary
When you have a private money lender, there are steps to take to make sure they know their money is in good hands.
Listen to this REI Classroom Lesson
Real Estate Investing Classroom Show Transcripts:
Mike: Welcome back to the flipnerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
H. Quincy: Hi, my name is H. Quincy Long. I’m president and founder of Quest IRA, Inc., the premier provider of self-directed IRAs in the country and I’m here in the REI Classroom to teach you today about top 10 tips for using private money.
Mike: This show was sponsored by passiverental.com.
H. Quincy: This is one that we get a lot of questions on so I want you to do it right. So my number one tip would be that using private money is all about one thing, that’s your relationship with the private money partner and so you need to keep in mind that private money borrowing is all about . . . it’s relationship borrowing. And the most important factor in that relationship is that they trust you, so keep that at the top of your mind.
Next, my number two tip would be, understand your money partner for risk tolerance, their perspective on short-risk versus long-term investments and how desperate they are for the income. If they’re going to get mad at you for paying the loan back, they may not be a good lender for you or money partner for you. Also, you need to understand some people want the money out there constantly and don’t want to be worried about it coming in and out. Other people want it short-term so that they can recycle it. And also, just understand their risk tolerance because some people are more tolerant towards risk than others.
And the number three tip, and this is very important, make the process of being your money partner as easy and painless as possible. You take care of all the details yourself. Your goal for your money partner is that they get mailbox money, which is money that comes to their mailbox every time, every month, or period, and they don’t even have to worry about it or fuss with it. If that’s not what you’re providing, you’re making an error.
Four, protect your money partner’s interest at all cost even if you lose money on the deal. Again, go back to the fact that it’s based on your relationship and if they trust you because they know you will take care of problems when they arise, you’re going to have a lot better success as a private money or a private money user.
Number five, have multiple money partners because circumstances do change regularly. For example, I do hard money lending all the time and what happens is sometimes, I get a loan paid back and I have a 100 grand in the bank and sometimes I don’t have any money at all. And so, circumstances do change.
Also, I’ve changed. In the past, what I’ve done is looked mainly for capital appreciation. But as I’ve drawn closer to 59 and a half and lost all of my hair, then I’m always looking at what the cash flow is on each investment. So circumstances do change so keep in touch with your lenders.
Number six, communicate. Update your money partner until they’re just sick and tired of hearing from you. And some money partners don’t want to hear anything and some want a lot of communication, and some like near in the middle. But understand that communication is key, especially when there’s a problem.
Number seven, provide your money partner with all the details of the transaction including your price, they’re going to buy it at comparable sales and anticipated repairs, and what you think you’re going to sell it for, all that information is important for your lender to make a determination. And then the more professional you make yourself look by presenting your stuff upfront, the better success you’re going to have at attracting money partners.
Number eight, know the documents. Boy, this is really important. I know a lot of users of private money all try to say, “Well, I don’t know what the documents say, I’m just going to let the lawyer decide that.” That’s the wrong answer. You don’t have to be a lawyer. You don’t have to be able to describe every clause in the documents per detail, but you should know the basics of what each document does and provide samples of those documents when you’re approaching a private money lender or a money partner.
Number nine, I think this is important to be able to demonstrate your successes over past deals. I call that a success book. This can be in digital format, but in your success book, you need to be able to demonstrate properties that you’ve done in the past, show it in the condition that it was in when you bought it, show the repairs being made, show the finished product, show the settlement estate when you bought it and show the settlement estate when you sold it.
A success book is basically like your resume and it’s very important to have that either in physical or more commonly these days, in digital format.
My final and number 10 tip is that your network is your net worth. And I hope that comes across clearly. It’s easier to see in print. But basically, in order to be a successful user of private money, you have to build your network. But not only do you have to build your network but you have to nurture that network, which means even if you’re not currently using the money of one of your money partners, what you’re going to want to do is to call them up.
Every once in a while, check in on them, have lunch with them periodically, go on cruises with them, or do whatever you need to do to remind them that you’re there and a professional who can help them invest their money.
So that’s my top 10 tips for using private money. Again, this is H. Quincy Long, president of Quest IRA, Inc. We encourage you if you want more information to come to our website at www.questira.com and we’ll see you on a future version of REI Classroom. Thank you.
Mike: Passiverental.com is your source for turnkey, done for you, rental properties. If you’d like to be an investor and not a landlord, please visit passiverental.com to learn how to purchase cash flowing, professionally managed, rental properties in the hottest rental markets across the country. We can also help connect you with financing for your next property. Invest the easy way today and get started by visiting passiverental.com.
Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of flipnerd.com or any of its partners, advertisers, or affiliates. Please consult professionals before making any investment or tax decisions as real estate investing can be risky.
Are you a member yet of flipnerd.com, the hottest real estate investing social community online? If not, you can join for free in less than 30 seconds and get access to hundreds of off-market deals, vendors in your market to help you in your business, and you can start networking with thousands of other investors just like you. Get your free account now at flipnerd.com.
Please check out the FlipNerd family of real estate investing shows, where you can access hundreds of expert interviews, quick tips, and lessons from leaders across the real estate investing industry. They’re available at flipnerd.com/shows or simply search for FlipNerd in the iTune’s store.
H. Quincy: Hi, my name is H. Quincy Long. I’m president and founder of Quest IRA, Inc., the premier provider of self-directed IRAs in the country and I’m here in the REI Classroom to teach you today about top 10 tips for using private money.
Mike: This show was sponsored by passiverental.com.
H. Quincy: This is one that we get a lot of questions on so I want you to do it right. So my number one tip would be that using private money is all about one thing, that’s your relationship with the private money partner and so you need to keep in mind that private money borrowing is all about . . . it’s relationship borrowing. And the most important factor in that relationship is that they trust you, so keep that at the top of your mind.
Next, my number two tip would be, understand your money partner for risk tolerance, their perspective on short-risk versus long-term investments and how desperate they are for the income. If they’re going to get mad at you for paying the loan back, they may not be a good lender for you or money partner for you. Also, you need to understand some people want the money out there constantly and don’t want to be worried about it coming in and out. Other people want it short-term so that they can recycle it. And also, just understand their risk tolerance because some people are more tolerant towards risk than others.
And the number three tip, and this is very important, make the process of being your money partner as easy and painless as possible. You take care of all the details yourself. Your goal for your money partner is that they get mailbox money, which is money that comes to their mailbox every time, every month, or period, and they don’t even have to worry about it or fuss with it. If that’s not what you’re providing, you’re making an error.
Four, protect your money partner’s interest at all cost even if you lose money on the deal. Again, go back to the fact that it’s based on your relationship and if they trust you because they know you will take care of problems when they arise, you’re going to have a lot better success as a private money or a private money user.
Number five, have multiple money partners because circumstances do change regularly. For example, I do hard money lending all the time and what happens is sometimes, I get a loan paid back and I have a 100 grand in the bank and sometimes I don’t have any money at all. And so, circumstances do change.
Also, I’ve changed. In the past, what I’ve done is looked mainly for capital appreciation. But as I’ve drawn closer to 59 and a half and lost all of my hair, then I’m always looking at what the cash flow is on each investment. So circumstances do change so keep in touch with your lenders.
Number six, communicate. Update your money partner until they’re just sick and tired of hearing from you. And some money partners don’t want to hear anything and some want a lot of communication, and some like near in the middle. But understand that communication is key, especially when there’s a problem.
Number seven, provide your money partner with all the details of the transaction including your price, they’re going to buy it at comparable sales and anticipated repairs, and what you think you’re going to sell it for, all that information is important for your lender to make a determination. And then the more professional you make yourself look by presenting your stuff upfront, the better success you’re going to have at attracting money partners.
Number eight, know the documents. Boy, this is really important. I know a lot of users of private money all try to say, “Well, I don’t know what the documents say, I’m just going to let the lawyer decide that.” That’s the wrong answer. You don’t have to be a lawyer. You don’t have to be able to describe every clause in the documents per detail, but you should know the basics of what each document does and provide samples of those documents when you’re approaching a private money lender or a money partner.
Number nine, I think this is important to be able to demonstrate your successes over past deals. I call that a success book. This can be in digital format, but in your success book, you need to be able to demonstrate properties that you’ve done in the past, show it in the condition that it was in when you bought it, show the repairs being made, show the finished product, show the settlement estate when you bought it and show the settlement estate when you sold it.
A success book is basically like your resume and it’s very important to have that either in physical or more commonly these days, in digital format.
My final and number 10 tip is that your network is your net worth. And I hope that comes across clearly. It’s easier to see in print. But basically, in order to be a successful user of private money, you have to build your network. But not only do you have to build your network but you have to nurture that network, which means even if you’re not currently using the money of one of your money partners, what you’re going to want to do is to call them up.
Every once in a while, check in on them, have lunch with them periodically, go on cruises with them, or do whatever you need to do to remind them that you’re there and a professional who can help them invest their money.
So that’s my top 10 tips for using private money. Again, this is H. Quincy Long, president of Quest IRA, Inc. We encourage you if you want more information to come to our website at www.questira.com and we’ll see you on a future version of REI Classroom. Thank you.
Mike: Passiverental.com is your source for turnkey, done for you, rental properties. If you’d like to be an investor and not a landlord, please visit passiverental.com to learn how to purchase cash flowing, professionally managed, rental properties in the hottest rental markets across the country. We can also help connect you with financing for your next property. Invest the easy way today and get started by visiting passiverental.com.
Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of flipnerd.com or any of its partners, advertisers, or affiliates. Please consult professionals before making any investment or tax decisions as real estate investing can be risky.
Are you a member yet of flipnerd.com, the hottest real estate investing social community online? If not, you can join for free in less than 30 seconds and get access to hundreds of off-market deals, vendors in your market to help you in your business, and you can start networking with thousands of other investors just like you. Get your free account now at flipnerd.com.
Please check out the FlipNerd family of real estate investing shows, where you can access hundreds of expert interviews, quick tips, and lessons from leaders across the real estate investing industry. They’re available at flipnerd.com/shows or simply search for FlipNerd in the iTune’s store.
