When you’re meeting with prospective private lenders, they will have questions - they want the reassurance that their money is going to be safe. If you’ve done your job, you’ve already educated them about the benefits of investing with you in real estate as opposed to putting their money in stocks, bonds, annuities or CDs. You’ve shown them how you can bring double-digit returns, and you’ve shown them how your process works. But, inevitably they will ask one, if not all, of the questions below:
- What happens if you can’t sell the house? For you, the answer is simple, but it will go a long way in allaying their fears: “I have other private lenders to refinance you off the property and pay you the interest you’re due. The house will sell – we have enough room to drop the price until it does. I can always get a loan in my name if I needed to and refinance you off the property (cash-out refi).
- What if something happens to you? As a businessperson, you need to make some real business decisions. Do you own life insurance, disability insurance, do you have someone who can step into your shoes and wrap up the deal if you are incapacitated. Have your affairs in order.
- Can you guarantee my money? This is where you need to be careful - you cannot promise a “guarantee” or that their money is going to be “safe.” Doing so will get you in trouble with the SEC. Instead, explain that their return will be “fixed” since it will be backed by a mortgage and note.