In case you don’t already have your own personal money tree growing in the back yard, you can not get bank financing for your deals but you want to invest in today’s opportunities I have GREAT NEWS for YOU today! Here is a path to follow where you can fire your bank and succeed!
1. Create your own bank with retirement accounts
The best-kept secret in America is the Self-Directed IRA. There are billions of dollars sitting in retirement accounts like 401k and various IRAs, but only two percent of the total assets are a self directed IRA. Most of the retirement account assets are sitting in stocks, bonds, mutual funds and CDs. The main reason for this is because the banks and brokerage firms sell these investment instruments.
A self-directed IRA allows the owner of the account to make investments in many different asset classes, including real estate. It is easy to establish a new self-directed IRA or roll other existing retirement funds into a self-directed IRA. The account custodian will take the role of administrator and assist with the documentation in your real estate deals and help you understand the prohibited transactions to avoid.
Once funds are in a self-directed IRA they can be used to purchase real estate or to lend to another investor to purchase real estate. If you buy real estate within your self-directed IRA, all of the future proceeds and profits will need to go back to your retirement account and not into your checkbook for everyday use.
I prefer to use retirement accounts as the bank. Accounts owners can lend the funds to other real estate investors. The retirement accounts get a fantastic return and the investor gets the freedom to buy houses without needing a bank mortgage. Who do you know that has a 401k or IRA that you can talk to about working with you as a private lender for your real estate deals? Make a list and begin to share the best kept financial secret with them and use their funds for your deals.
2. Network, Network, Network
Everyone has money problems today, and that includes everyone from the unemployed to the very wealthy. The wealthy are struggling to find a path to cut losses in the stock market without placing all their funds into CDs that are earning less than 1% in today’s marketplace.
Millions of dollars have been taken out of the market and placed on the sidelines. Today’s economic challenges make it easier to approach potential lenders with a real estate option as an alternate to CDs and the stock market. Who wouldn’t want to earn more than 1% ?
Develop a simple, concise 30 to 60 second summary of what you do and how you work with private lenders to provide a solid return. End your short presentation with a question that requires a response. Once you can naturally tell your story, you are set to spread your message.
Where can you effectively network to find private lenders? Start with financial type meet-ups focusing on retirement, investments and other meetings with small business owners. You can also spread your message using social media such as Facebook, LinkedIn and Twitter.
The most recent private lender I picked up was because I was a good listener. I heard this individual tell me that he use to live off of his CD interest, but that it is no longer possible since the rates are now so low. He also told me that he was not sure what to do with their funds because he did not know how to get a good return on a safe investment. Are you ready to respond when you hear someone talking about how to make good returns and preserve their capital?
3. Attract the money
I am an Engineer by education, not a salesman by any real stretch, so I am not personally comfortable with asking people for their investment dollars for my real estate deals. The good news is that once you start to have some success working with private lenders, you will find that more of them will begin to find you as “success breeds success.” The whole key is to be prepared to educate people and help solve money problems. The good news is the answer is by investing in real estate with good old fashioned hard assets in your market.
If you begin to attract money, are you ready to put it to good use?
The deals and opportunities in today’s market are likely the best of our entire generation. The key is to be able to buy as many houses as you want without using your own money and without needing a bank mortgage.