You will only be in this position once and it will take the wind out of your sails. You get the contracts together and run all over town to find someone who will give you money to buy that house. Only to find that its not the lenders who are not willing to write a new loan for you its the Mortgage Insurers or the LMI providers as they are known. In other words the banks do not like the risk that you are not putting enough money into the deal or they think you have too many loans for your salary or a combination of all three.

When buying houses you do not always have to run off down to the bank to get the money. If you are wealthy enough you just pay cash and its yours. Meanwhile if you do not have the cash available why not get aligned with a few private investors? These guys have cash sitting around all day long and will lend you whatever you want secured by real estate.

I have a few gents who were from mortgage or real estate agent backgrounds, who did well and know the rules and the game very well. They want to help sometimes and other times be very silent. These guys disappear to Europe and just check their statements from me on a quarterly basis. They are hesitant at first with lending, but after doing what you say your going to do. They are like gold in your pocket.

If you don’t do what you agreed to do, they will no doubt take the security from your reach and never do business with you again. These guys are well connected and could be a non stop source of new private individuals. On the other hand they could make your life hell if you mess them around or you do not do what you said you were going to do.

These guys lend to entrepreneurial guys like myself because I pay them a very high interest rate of 14%. They like earning that secured by real estate, because it is safe and secure. Looked after by myself or my property manager and will be refinanced out within a few years. I do not mind in borrowing the money from these guys at 14% as I know the money will always be there when I need it. It gives me options to do more things than if I waited to save more money for deposits or refinanced another property to cover the shortfall of another purchase.

I understand that my profit may be less than if I was not paying the massive interest rate to my private lender, but I would be making nothing if he was not getting his cut too. These lenders are not for all my houses, they are for when I just need to secure a house without using any of my money.

These guys are always there when the ‘deal of a lifetime’ comes in and the banks are on public holidays or they want to get so much paperwork done that the property will be sold to someone else. They don’t need pre-approvals or heaps of paperwork. They want to know where the house is, who is living in it and when they will get paid either monthly or weekly.

Although these guys are happy to do short term lending they prefer to let the loans run a few years as the return on their investment is far greater than if I was to go and refinance them out after 2 months.

How do you find these people?

1. Find these guys by asking around.
2. Find out who has sold a business lately who may be interested.
3. Ask agents, Brokers or Accountants for leads or write letters to people whom you may think would go for being your private lender. Include some of your deals that you missed because of not being able to secure the money, and of course deals you have done and the profit in it for you. To be extra cheeky add what they would of made if you used their money!
4. Advertise in the local newspapers or business magazines.

If all else fails ask the vendor to finance you their house over 2 years then refinance him out. He may just like to do it again and again as aside business to you.

You will need to get your hands on the right sort of documents and paperwork to ensure you are protected and secure and so is your private lender. Your solicitor will be happy to write these documents up or you can get them online at legal supply shops. They send you a word doc you can alter or you can choose to fill in the blanks.

There was once a time when there were no banks, no brokers and certainly no credit providers. People used to buy houses and property in exchange for either goods or services. Perhaps you could use your trade or skills to help sweeten the deal if it gets it over the line. Just make things happen to get the business done.

You might even find that after a while you start lending yourself because you just like 12%-14% and don’t have to leave the house.

Private Lending,

Don Christie

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