Private lenders are individuals you can borrow money through without going through a mortgage broker. This can be anyone who has money either on-hand, in an IRA account, or in stocks or bonds that can be liquidated.

Finding Private Lenders Who Are Already Doing Loans
Ideally, you will want someone who is already lending to (or partnering with) other investors. There is not any explaining for you to do, nor will you have to talk them into doing something new, because these private lenders are already familiar with how to make the loans and the big returns they can receive.

Referrals
One of the easiest ways to find a couple of private lenders is to ask some title companies if they know of any private individuals who lend money to investors. Be sure to clarify whether or not the person at the title company is giving you the name of a broker or the name of an actual private individual who lends money.

If you ask another investor for a private lender referral, they’ll most likely look at you like you are crazy. Most investors will be reluctant to tell you where you can borrow money. It is just part of the competition in the market place that you not give out such highly valuable contact sources.

Private Lenders Who Are Foreclosing
You can also find private lenders by looking at foreclosure notices where the foreclosing party is a private person. This means that the person who is foreclosing acted as a lender. This may be where a seller has created a seller held mortgage or it could be a private lender who made a loan to an investor. It is these private lenders that you are trying to find.

Once you have identified a private party who is foreclosing, you can figure out if it is a private loan by pulling up the recorded copy of the note at the court house and checking the interest rate the money was lent out at. When you find one that has an interest rate of about 14% or more, you know you have found a hard money private lender.

To get the contact information on the lender, simply look for the address to which the payments were supposed to go to on the mortgage. Then mail a letter to the lender similar to the one in Exhibit 4.1.

Realize that the purpose of doing this is not so much that you can possibly purchase the property from the hard money lender, but you want to know the lender so that you can borrow money from them in the future.

Legal Notices Newspaper
You can also look for new loans as they are being recorded where the lender is a private party. Most cities have either a special legal newspaper or a legal section in one of the major newspapers that lists documents that have been recorded at the courthouse the previous day. These recordings are usually broken down into separate categories including foreclosure filings, deed transfers and mortgage recordings. It’s the mortgages which are being recorded that are of special interest to you.

When a recorded mortgage is listed, it usually lists the borrower’s name, the property address, the amount borrowed and the name of the lender; along with the book and page number of where the mortgage is recorded in the courthouse.

Once you have identified several private individuals who have made mortgage loans, you can then go to the courthouse to find out if it was a hard money loan or if it was just a seller doing a seller held mortgage by looking at the interest rate.

Using the book and page number, you’ll want to pull up the mortgage note and look at the interest rate the same way as we discussed earlier. After identifying a private loan and getting the lender’s mailing address, you want to mail a letter similar to the sample letter in Exhibit 4.2.

By the way, you can look for the names of all your county and city newspapers in the phone book. If you can’t find a legal newspaper there, you can also try calling a few title companies or attorneys to see if they know of one.

Regular Newspaper
You can also find private lenders in the regular newspaper by looking for ads under the categories “Investment Properties For Sale? “Money To Lend? “Investment Opportunities? “Real Estate Wanted? or any other similar category. It is very common for lenders to advertise in the newspaper where they know real estate investors will be looking. This includes placing an ad that they lend money in the “property for sale?or “real estate wanted?sections of the paper.

Finding Potential New Lenders
Other than locating private individuals who are already making loans, you can also work on finding people who have never made a loan before, but who would be interested in doing it. If you know where to look, it’s not to hard to find people with large amounts of money invested in an IRA account (or in the stock market) who would be interested in getting a 15% yield or more on their money by making private loans that are secured 150% by a first mortgage on real estate.

One of the best places to meet people with money is at a golf or country club. List companies are great as well. They can provide you with the names and addresses of all kinds of people including people who live in elite neighborhoods who have IRA accounts. Most of all, simple word of mouth works great too.


Included In the Real Estate Investing Quadrant Success System course are sample conversations, letters to mail to private lenders and more.

This how to article is an excerpt from the Real Estate Investing Quadrant Success System course.

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