Private Money Deal Structuring Tip: Pay Private Lenders with Their Own Money!
With private lenders for real estate, you’ll often want to defer your interest payments until you pay the lenders off. But how do you convince your private equity lenders to wait to get all their $ ’til the end? This video on how to structure private money lender deals shows you a great deal structuring technique and allows you to massively decrease your “cash into the deal” while keeping your “cost of $” relatively the same. Plus you’ll see how you can pay private lenders with their own money, and have them thank you!
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Will the same strategy work on a buy and hold?
Only if you have a plan to pay the short-term lender off and refinance the property into permanent financing
Outstanding explanation, coming from a teacher, you did an excellent job explaining. My question is, “How do you navigate around the 1-2% earnest monies most sellers request?”
Hi Chuck. Negotiate a smaller downpayment. Come up with some cash – at the end of the day you should have SOME cash to do deals. Earn it. Borrow it. Find a partner.
Daniil ,
If I didn’t know better I’d think that you had my office bugged, lol. I was just going over the one offer two/three options method for some deals in the works. I’m not sure if it was Russ Whitley or another real estate educator of yesteryear that taught me that strategy. I was cleaning out some emails on file and came across it and decided to revive it for current and future usage.
That is awesome Mary! It sounds like it is most definitely time to revive it 😀
Hi Jerry! The $5,000 contingency cushion will cover the $2,600 in points meaning you won’t have to actually bring any cash to the table. You can lump your holding and closing costs into the loan if you want or pay cash for those.
Draws are done on a schedule and are split up into milestones or phases of your project. When you have completed a certain amount of work, you will show proof to the lender and be reimbursed. The terms of your draw schedule will be based on your lender.
With all of that said, the beauty of private money lending is there are no hard and set rules, it boils down to whatever terms you and your private money lender find agreeable amongst yourselves.
If you can’t come up with the cash from a private money lender, you have to get it somewhere and we do have users who use hard money lending. However, it sounds like you would benefit from real-estate investing advice aka mentorship, which we do not provide here in software support. It’s not that we don’t want to be helpful in that area but our expertise is in software support.
I’m including a link I think you may want to consider to solve that for you. We have an Inner Circle mentorship program where you’ll have direct access to Daniil (our boss and creator of Rehab Valuator software) and Jim Ingersoll who are both well-seasoned investors with a wealth of knowledge they can share to help you along the way. Inner Circle
Haha that would be nice! But when you teach a man to fish, you feed him for a lifetime.
Thanks Daniil…
The only thing left …is for you to do the deal for us…lol
Thank you James! We are happy to hear you are following the strategies and find them to be useful. Please reach out to us at support@rehabvaluator.com if you find yourself having any questions regarding the software.
Hi Tim. Yes, absolutely!
Yes, there is a way to structure your deal with accrued/deferred interest for 12 months in the software
You’re very welcome, Lea Anne and I appreciate the great feedback!
As usual, you have wowed me! I had thought of this in a very abstract way and you actually showed me how to make it happen! This is the best deal out there! I love Rehab Validator and all it offers! Your training is invaluable! Thank you! Thank you! Thank you!
Does the software include the accrued interest deferred over a 12 month period?
Can this be used to obtain and rehab commercial property? I’m looking to put my food and hospitality business into a brick and mortar
Hi Garth! If you end up using the draw feature within the project management feature of the premium software, we’d be happy to help if you find you have any questions. We can be reached at support@rehabvaluator.com
Thanks Joe! We’ll keep working on over-delivering 🙂
That is wonderful to hear Howard!
Thank you Joe! We are glad you find our program to be helpful 🙂
Smart strategy used it many times, working with your program has always been helpful.
Thank you for great in sight It will help me out greatly
Howard
Hi Daniil! That was a very nice presentation… I followed all the numbers but, had a question. I believe you said that by adding the $5,000 cushion on the rehab budget of $50K …that you would pay the $2600 origination fee to the PM lender and cover the $5,000 closing costs out of the $50K borrowed from the PM lender…. is that correct?
Also, you mentioned that some private money lenders won’t fund the entire rehab at closing and will only allow draws… does the initial draw take place at closing and is it high enough to still pay the closing costs and 2 pts to the lender?
Also, would you recommend getting hard money if needed to cover the closing costs and points to the PM lender if you do not have the available cash to pay it yourself? Thanks!
Hi Mr Kleyman I watch the video that was awesome thanks for all the jewels that you continues to give I appreciate all that you do keep up the amazing work blessings
Thanks Daniil, great content as always. You always over deliver. Regards, Joe
Nice explainer how to be flexible with financing request. Not sure it will work for newbie. I have spoken to number of hmls who have told me it is a reimbursed rehab draw. But I will keep trying to find ones that are flexible like this.
I’m looking for a private lender for my investment properties. You can structure private lending deals many ways, so rather than. It is One alternative is seller financing, where the seller takes on the role of lender.
We look forward to that.
Yes, this is just great & I will be glad to join all of your stuff when I can
Think you for your time & corperation, T.H.
Hi Charles,
Thanks for the feedback and your suggestion. We have made a note.
Nicely done. Like the ‘options’ approach, much easier to reach agreement. Would like to see more deal option examples.
Keep up the great work.
Charles
Pps . Transcript does not match.
If it’s with private lenders, then it’s up how you guys structure it. If you’re dealing with banks, then there is a very specific structure to it.
Glad to hear it, Jim. Reach out if you have any questions!
Awesome! Glad to be of service.
Hi Luis. First lien is how it’s usually done.
Appreciate the feedback, Jay!
Hi Eleanor. With private lenders, you have the ability to request all rehab money at closing. This obviously requires trust on their part and as a lender, I would usually not do that myself. But in a situation where it’s a small rehab or I explicitly trust the borrower, then I’d fund rehab money at closing.
Hey Troy. You’ll do great on the Glenwood deal – it’s a solid property!
You can get more info on the Rehab Valuator Inner Circle here:
https://class.rehabvaluator.com/inner-circle-join-now
Thanks, Amos!
Learn to use the software before you have a deal to look at, that way you’re ready. Same principle applies to finding money. You should be lining up financing before you ever have a deal to fund, that way you’re not scrambling to find $ last minute
Exactly! The “illusion of choice” strategy works in many different situations!
The point of this whole tutorial is to get you to think creatively about deal structures. Present multiple options to your lenders/partners. As for the closing table, you’re only responsible for bringing to the closing in cash what the HUD requires
I have absolutely no clue what you’re asking me here. I am only approving this comment because of the hilarity of bad english here
$225 net is definitely a good way to start the year!
Bruce. Right now, you can toggle between “Rehab” and “Construction” at the bottom of the input screen and that changes the language in all the reports.
The detailed Rehab Budget is pretty customizable as well. In our next release it’ll be even more customizable. Check out these videos for a list of recent updates we’ve made to the software:
https://rehabvaluator.com/tutorials-web/software-updates
Appreciate the kind words, Bob! And definitely hope you start using the software more. As you can see, it’s a pretty powerful tool to have in your arsenal! 🙂
Private lenders are a lot less likely to care about your credit score than any other type of funding. Read up and get a clear understanding of private money here please:
https://rehabvaluator.com/content/private-money-explained
Rehab Valuator allows you to create funding proposals for private lenders, but you will need to find them yourself! Again, the blog post above talks about some ways to locate them
You’re welcome. Happy new year to you as well!
Thanks, George! Appreciate you watching!
Always good to hear from you, George! Happy new year to you as well!
Hi Tom,
We are so happy that you are loving the software. Please reach out if you need assistance with anything!!
Daniil,
Great information!! Thanks for sharing! One question regarding draws, do you negotiate when the draws happen or is there a common formula lenders use?
Thanks for your input.
GOOD STUFF I WILL USE IT AFTER I LEARN WHAT THE VIDEO TELLS ME WHAT TODO
All information that I have been able to take the time to sat down and view has been more than helpful. It”s amazing that all of a sudden, everything clicks now. Thank you for your continued help.
Clever, Daniil. I followed this & it is a powerful strategy.
Rehab Valuator is the “bomb!”
Welcome!
Very useful. Thanks
Thanks Stephen for your kind words!
I have used the process of borrowing more money for home improvements to pay back the loan for 2 or 3 years so the project is completed and in tht time increase my income before using my own money to pay back the loan. Never ever thought of using this method in RE investing.
Thank you for teaching us this wonderful powerful method.
I enjoy this presentation Danill, you made it a lot more clear for me plus the Ninja Tips are great thank you for what you do to help all investors. Stay well Be ssafe Happy New Years lol
Daniel,
Thanks for this super great insight in structuring private money. I am unclear about requesting the rehab money at closing if the rehab money is being offered in draws. I thought that there are specific rehab actions that has to be accomplished before you can actually get the money if the money is being offered in draws. Please explain that section again. Thanks so much
Awesome,
please l need more clarity on cost of rehab per sqft.
Thank you
Daniil,
As always great info! I haven’t had to raise money yet, but we are planning on getting into larger multi-family projects where we will need to raise money and your info is always useful. As always thanks a ton! Fingers crossed this deal on N 35th & Glenwood that I partnered with Chris Johnson on is a success. I need to get involved in your inner circle “mentoring” this year. Can you remind me where I go to visit that site and get involved.
All the best in 2018 – Troy Kingsbury
That’s an excellent presentation Daniil!
I thought this video was very interesting. I have yet to use the Rehab Valuator since we are still trying to find our first deal but I’m sure it will be very valuable in time.
I’ve used the strategy of presenting options to sellers when making Subject To offers. I can easily see why multiple options for Private Lenders would definitely work very well. I will add this strategy for my Private Lenders…effective today.
Dear Daniil I,am really very thankfull to your initiative of training that you rendered to me. but I,am expecting yielding and hervesting soon ,but when? and how?.
thanks.
matur makoi
Excellent strategy on paying the lender with their money. Can this strategy be used even if they don’t agree with points upfront and lower interest? When we’re at the closing table do we have to tell the escrow officer that our down payment is coming from the buyers money? Wouldn’t we be required to deposit earnest money before the lender wire the funds?
Daniil, smooth presentation. First time I presented it, it might have been too simple for the mortgage originator that I spoke with. I am going to “back up 5 yards and punt”, find another way to present it. Possibly, find another way to “present the entire package” I will reach out for you shortly. I have (3) three deals pending, that would net $225k. That sounds like a nice way to start the New Year off.
Does the Rehab Valuator allow for renaming line items. Not their function. I am a builder so I want to do some minor tweaks, like deleting the word “rehab” and substituting terms like “hard costs”, “soft costs”, etc., and possibly adding some line items.
Hey Daniel…. Happy New Year!
Just wanted to thank you for your continuing giving to the investing world. Anyone who does not appreciate what you do doesn’t belong in this business. I need to utilize this tool more than I have (think: NY resolution!). Thanks again for this focus and can’t wait for what you have up next.
Bob
This was very informative. Do the private money lending structure/deal you laid out require that a person has OK to good/great credit? I’m wondering does this work with someone who has say a bad credit score of like 500 or is that not a factor? I was always under the impression that private money lenders required a certain credit score.
Also, are private money lenders available on your site as a premium member? I ask because I am a premium member and I have a property owner who is looking to one or more of her properties.
First property is a duplex that’s own free and clear (no banks/mortgage) by a older lady who may be open to me doing a Seller Finance Deal for a duplex where I may be able to do a Buy-Hold. The house is ready to be moved in, however I would want to do some cosmetics work if I purchase the property. She currently have tenants which are bad tenants that she is having removed this month. She also have another property that I may do a similar deal. ARV=$95k
Do you believe I would be better off doing a seller finance or private money deal knowing that I don’t have any money to put down on the deal? I already know that with seller finance I can structure the deal in anyway that works for the both of us. (in addition I’ll be getting my Real Estate License this month which creates more options).
Love to hear your thoughts………..
Thanks for giving us this training on private money. Happy New Year to you and your family.
Hi Daniil.
Hope you and your family have a great Christmas and new year i love the video and hope to start using it to get some private lenders to work with i have a great deal of rehab experience which i intend to used hope to have a very great year thank you.
George
Daniil,
As usual, you have delivered quality, actionable content, for FREE! I always recommend Rehab Valuator software to my clients/students, simply because it works! You still rock, man.
HAPPY NEW YEAR to you and your family.
Great information!
Awesome presentation!
Very well explained and understood. Where can I get some examples of Executive summary Proposal Language to use in the Executive Summary Proposal.
Thanks I’m starting to understand a more and more with everything. Thanks
I wish you could see the smile on my face. REHAB VALUATOR IS A GAME CHANGER IN MY LIFE. GOD BLESS YOU AND YOURS!!!!!!!!!
Daniil,
Thank you, You have provided great examples of the real advantages Rehab Valuator Premium software. I look forward to using this content for my next deal.
How does the lender secure their loan in the case of a lender that is working with you for the first time? Do they get first position on the property?