The third list in your relationship database is going to be your money list. These are the people or companies who have available funds and are looking for properties or investments that will allow them to profit from the lending of funds—and who are quite willing to lend you money so you can purchase even more properties. They make money through the interest you pay back on the properties you sell or the deals you make.
Again, research here is important to find good quality lenders. As with buyers and sellers, not every money lender is the right one for the deal you have going at the moment. Each lender has their own needs and wants regarding the properties they are willing to finance, and they all have varying degrees of resources and experience.
There is also word of mouth advertising and referrals through some of your other partners who may know of money lenders. Many buyers and sellers are in partnerships with lenders and can point you to some who are interested in the properties the buyer or seller deals in.
You can also go through the traditional lenders of banks, mortgage companies, and such. However, these lenders are bit more apprehensive in doling out the money and may want a longer time frame or more commitment from you in deciding on financing one of your deals. But, if you can’t find an appropriate lender from the other lenders on your list, having these types of lenders on the list at least gives you a last minute option.
One way of building a list of lenders if you are just starting out is to approach family members and friends who have the money to invest and who would be interested in partnering up with you. However, there are some negative aspects of raising money from friends andfamily. They may not be sophisticated or knowledgeable enough to know the difference between a good deal and a bad deal, and this can lead to problems if a deal goes sour. So when you take funding from friends and family, be very clear about the risks and downsides and make sure they understand the time frame their money will be tied up in the deal so that they are not counting on that money for other investments or expenses. Nobody is perfect and sometimes a deal just does not go through. If they understand the risks involved and are willing to take those risks, then friends and family members can be excellent candidates for your money list. Personally, we have used our friends’ and family’s money for our own deals and every time they walk away very happy with the results. They are making money on their interest and we are able to rehab or rent properties using their money and generate a good cashflow. Great communication is key at all times to ensure a long-lasting relationship.
It’s possible that your family and friends may have connections with other people who have the money to invest in your deals. Or maybe a friend of a friend of your cousin may know someone who is interested in funding deals. Going through your friend and family relationships may get you connected to those four, five, or even six people away who are interested in lending you money.
Never ignore even a mild interest from someone who may want to invest in your deals. Put them on your list and approach them if a suitable property becomes available. You will quickly be able to weed out the quality lenders from the rest.