Private Money – No Money Down #8
Today, we’re gonna talk about buying real estate. No money down using not just somebody else’s money we call it “OPM” other people’s money. today, we’re going to talk specifically about.. Shhh!!! Private! Private money! it is out there in great abundance and it is available to you and I to transact your next deal.
Alright Let’s talk about private money. Now I’ve done over a thousand deals using somebody else’s money but you gotta make sure you’re engaged in the right kind of deal.
What is private money?
Well bottom line is, this is a very professional use of OPM and when I say professional use, this means that there are men and women specifically that manage or have a fund of money and they intentionally lend it out to get a certain ROI a certain return. and it’s not like borrowing from a bank where in the market sometime you get locked in with three, four, five or six percent interest rate, you know private money can cost you eight, ten, twelve percent. There are some out there that get into what we call hard money lending where you can start seeing over fifteen, eighteen, twenty percent ROI rate of return.
Now the important thing is to know that your investment long term is managed by cash flow and if you don’t have cash flow high enough, constant enough to actually manage the cost of the debt then hard money will actually not work. But if you’re gonna hold the house for a very short period of time then hard money can be extraordinarily brilliant. Which is why I’ve done it a thousand times. We manage professionally, these really awesome tight tiny margins and we do real estate in volume so let me give you a scenario of how this works,
How do you do it?
So in my company one of the things I do is I transact thousands of properties nationwide in the hottest markets for myself and for my clients everywhere. Well, when we go into those markets I have a system set up where I like to risk somebody else’s money and the system is so good that it’s become super dependable to me. So what I’ll do is we will take some money, we will buy a home that has gone through an extensive vetting process and the home is then going to get supplied to one of my clients. Now the margin is big enough for me to basically manage the team to actually do this entire process and so what that means is I can borrow the money, buy the house, fix it up, get it chunky, sometimes even rent it out and then actually get it presented to somebody else it’s almost like this concept of a mini flip if you will and I’m using someone else’s money to be able to do this.
Now I also have my own fund that I manage which is also a conglomerate of a bunch of other people’s money and we leverage our own money internally and how we do this, you could for example it’s just a little bonus for just fun okay? you might be able to get a loan against your 401k and you could use it as a bank or maybe you’ve invested into a life insurance policy where you put money in and you can borrow against it and like a one percent arbitrage. Meaning, that if you make six percent a year on it you can borrow at seven, It only cost you a net 1% and all of a sudden. you’re life insurance policy becomes your bank. Your 401k becomes your bank or I have my professional hard money or private money where they’re the bank. Often, if the deal is right, they’re a lot easier to go through underwriting. Meaning they’re going to scrutinize a whole lot less on what it’s going to take to do the deal and the payoff is they get to charge a higher rate of return.
So let’s just say that I’m paying out 12% to someone for their money but I’m managing the buying and selling of this home and let’s do a scenario where you’re actually flipping a house and let’s say you get to flip this house for a $40,000 profit. If borrowing that money for a 9-day period of time that ending up costing you $5,000 does that make sense over 90 days on a $40,000 game? well listen, if you know your number and you’re doing things right it absolutely can. So, this is another great money, no money down strategy in understanding there’s a world of private money.
But where do you find the money?
Now real quick one more bonus. We got time right? where do you go find money? every local area has it’s local RIA. Meaning, real estate investors association. They do these free lunches, free monthly whatevers and you’ll find training happens there. you’ll find that people will come and bring deals and there are other people that have money saying “we’re ready to lay money out. Who here has a good deal?” That’s an excellent way to find either non savvy private money all the way up to super professional private money just like my own events that I do where people come together some with money, some with credit, some with deals and together we make deals happen.This is a fantastic strategy I encourage you to learn a lot more about it.
And that my friend is how you buy real estate using private money. Someone else’s money.
If you’d like help creating a game plan specific to you?
We offer a free game plan consultation. I look forward to talking to you, to help you figure out your own plan of how you can invest in real estate with no money, like I did.