At MAREI, our local real estate investment association in Kansas City, private lending is a frequent topic of discussion. From networking before and after meetings to dedicated master classes, we dive deep into this critical aspect of real estate investing. In fact, we have a six-hour master class on private lending coming up soon. If you’re not attending your local REIA and participating in these events, you’re missing out.
The Power of Private Money
Last year, my team successfully used a private money partner to fund one of our deals. The results sparked interest among fellow members. One member reached out, eager to transition from hard money lenders to private lenders, and asked how we cultivated these relationships. That conversation inspired me to share these insights.
Ways to Partner on a Real Estate Transaction
Private lending is as flexible as you make it. Here are some common ways to structure deals:
- Flat Fees: Some private lenders prefer a simple flat fee, which, depending on the deal’s duration, can translate to high effective interest rates.
- Profit Sharing: Others might request 40-50% of the profits. While it can be pricey, it’s often worth it for the right partner.
- Interest Rates: Straightforward interest rates, usually 8-10%, are another option. However, long holding times can eat into profits.
- Custom Terms: Every lender-borrower relationship is unique, making private money both creative and versatile.
While hard money lenders are a great resource, private lenders offer more flexibility. For us, they almost seemed to walk right into our office—literally.
How to Find and Cultivate Private Lenders
Brag a Lot
The first step to finding private lenders? Talk about what you’re doing. Our first private lenders were our insurance agent and family members who noticed our real estate activity.
Having a platform to share your success stories helps. Create a website or Facebook page to highlight your deals, your partners’ profits, and how you protect their interests.
Teach
Hosting workshops is another effective strategy. For example, I’ve seen investors like Will Pritchett offer classes on private lending, attracting lenders while building credibility. Another investor I know provides free online courses on private lending, undoubtedly growing her pool of lenders.
Teach Some More
Begin helping newbies at your local REIA. By guiding them through their first deals, you become a trusted resource. Many find that active investing isn’t as easy as YouTube tutorials make it seem. When they realize they’d prefer to lend money instead, you’ve just found an ideal private lender.
Become Famous
Creating content can elevate your credibility. I know several investors who use Bigger Pockets to share articles and case studies, attracting private lenders. One made it his goal to appear on 100 podcasts in a year to expand his reach.
If creating content feels overwhelming, start closer to home—share your success stories with us at MAREI. We’re always looking for case studies to feature.
Network
Networking is at the heart of private lending. Attend every MAREI meeting and prioritize both the networking hour before and after events. Make it a goal to reconnect with familiar faces and build relationships with new attendees each month. Don’t stop at in-person events—our virtual Saturday workshops connect investors nationwide and provide great opportunities to ask insightful questions.
Speed Networking
If you’re looking for a way to pitch to multiple people quickly, speed networking is ideal. It’s a December tradition at MAREI, so mark your calendar and bring a concise elevator pitch and materials to share.
Self-Directed IRA Events
These events attract two types of attendees: beginners eager to learn and seasoned investors with ready capital. Networking at these gatherings can lead to invaluable private lending connections.
Direct Mail Marketing
Although I’ve never personally used it, some investors find success by sending targeted invitations to high-net-worth individuals. These mailers often promote mastermind groups, workshops, or one-on-one sessions.
Buying Creatively
Creative financing strategies, like seller financing, can cultivate private lenders. We recently held master classes on creative financing, and I’m sure there’s more to come this year.
Marketing
Marketing for private lenders requires caution to stay compliant with SEC regulations. Experts like Alan Cowgill offer insights on avoiding legal pitfalls in a past webinar we did on why you can’t advertise on Facebook.
Final Thoughts
Private lending is a relationship-driven, flexible way to fund real estate deals. Whether through teaching, networking, or creative partnerships, the opportunities are abundant if you know where to look. If you’re in the Kansas City area, join us at MAREI for meetings, workshops, and master classes. You’ll learn, connect, and take actionable steps to grow your portfolio with private money.
Reserve your spot at www.MAREI.org.
