The other day I had an IM session with my mentorship group and had a question from one of my students. It was about getting a short-term loan for cash to purchase real estate, mostly to flip property but this can also work for a buy-and-hold deal as well.
But he didn't want to get a loan because, well...he can't. His personal credit sucks and he didn't build his business credit yet.
So, I told him (and the rest of the class who attended the IM session) about a little secret that I've been doing for years that I guess I never thought of telling my students about before. And this is a secret to getting liquid cash for a deal without having to share any equity in a property.
I told him about how I raise liquid capital using the same method I use to attract new investor partners into my "web." I'll post a deal a proposal on the Loopnet Big Board(under "Looking for Capital/Investors") the same way I do when I attract investors to a real estate deal.
Except, well...I never, ever mentioned this secret to my students. And no, it wasn't like I was trying to evade telling you guys. It just never came up until the other day that maybe my students could benefit from this little strategy that I've been using for years.
So, here's how this works:
1) Figure out how much cash you need (based on a real deal whether this is for a down payment, rehab money, etc.).
2) Write out a short "proposal" that will be posted online.
3) Create a longer proposal (up to 3 pages) on exactly what the benefits of this loan will be to the prospective investor.
Here's a sample:
Headline: We Pay 18% Interest on Short-Term Private Money
"Seeking $150,000 to finance a highly profitable real estate acquisition in Texas for a 12-month term with a 15% interest to be paid out monthly. If interested, please contact us for further details."
And it's as simple as that.
Now, here's the deal: Before you give out any specifics on the property deal (like the address), it's best to have the deal under contract. You'll then have a contract with escrow instructions (for their depositing of the funds for the deal) for them to look at.
On the Loopnet Big Board, you have to post for a solid month. You'll get about 50 to 75 different responses. About 10 of them will be legitimate. So, instead of having only ONE deal needing this kind of cash, maybe it would be a good idea to have several deals lined up of the same caliber/price that would need the same exact amount of cash so you can make the most out of your one ad that you place for a month.
Worst case, you'll get your one investor to put in $150,000. Best case, you'll have about 6 to 8 deals going on at one time. How exciting is that?!
Now you know, in a nutshell, how to do it.
Of course, there's a little more to it such as how to put the deal under contract before sending the contract and escrow instructions over to the prospective investor and how to create a short legally-binding proposal. Since it's a lot of information, I'll be presenting that in Detroit next week along with a bunch of other cutting-edge information.
Here's something else that you need to know and really should consider doing if you have a personal mid-FICO below 680. You should fix and rebuild your personal credit. Right now I am offering a ridiculously low basement-bottom price (that I've never offered before) on my credit building service. Because we're coming up on the holidays, this is the best time to have things removed off your credit reports. This is why I'm offering this special for Veteran's Day. Here's more about it: http://www.monicamain.com/credit_blow_out
See you at the top!