Ask Cornerstone: I’m having trouble finding private money for my projects. How do I better attract hard money loans? Is there any specific technique or language that is being used that works best?
The main reasons private money lender reject deals are in the numbers, not in any of your “specific language”. Loan request proposals, including your exit strategy, do need be well written and clear, but more importantly the figures and data need to show that the property is a good deal. As a lender, if I am not convinced that borrower will make a decent profit then I will not lend. So again the secret is in a “good deal”.
When you present a deal to an investor or a lender make sure that it is complete and its assumptions are well backed up with data. Primarily, your project should clearly show that with the purchase price and all costs (e.g. loan costs, fix up costs, interest payments, and closing costs), that you would realistically clear a profit of at least 10%. Smaller profit puts the lender in a more risky position. Well backed up figures, in a solid, well written proposal, will make it easier for lenders to make the loan.
Our flip calculator focuses on the key areas that both help you make a decision on a project for yourself as well as help lenders see your figures in a well laid out format. You can download it from here.