When Saying “I need Private Lenders for this Deal” can get you in Trouble!
In last week’s eNewsletter, I described the SEC and their regulatory power over businesses and how they make money. I wrote about the exemptions that fall under Regulation D rules 504, 505 and 506. I mentioned that in many states, but not all, you can advertise for accredited investors.
I live in Washington State and this is one where you cannot advertise for lenders. I also explained that you will probably only get caught when things start to go horribly wrong and your lenders start to come after you, throwing complaint after complaint, desperately trying to get their money back. This can and will cause you and your business great harm.
What many investors don’t understand is that getting up in front of a room of people where you don’t know them and don’t have a relationship with everyone, can and will be classified as general solicitation. There really are better ways to find private lenders.
I always recommend Real Estate Investors to first begin looking for Private Lenders in their own back yards. I can hear you saying “But Paul, I don’t know anyone that has any money!” Most people have a much broader sphere of influence than they may realize.
Have you ever played the 6° of separation game? If I remember the game correctly, it was used to name actors that stated with one actor and within 6 names you have to touch Kevin Bacon. Something silly like that. Anyway, the point is that when you ask for referrals to someone who may know a private lender you are only 6 steps away from someone that knows the right people.
If you belong to the online website www.linkedin.com/in/paulgalasso you know that this premise is the core reason behind this website. It allows you to reach not only people that you know but also people they know. There is a way for you to get in touch through recommendations to many people around the country.
There are other ways to find private lenders and I am a big proponent of doing just that. I believe in creating a group of potential private lenders that I call my lender coalition. Now a quick point of clarification about this, I am not having them throw their money in a pot for me to use at any time. This is just a group of individuals that are interested in becoming private lenders and have money to invest in the right deal.
This enables me to develop a relationship with them to see if the project that I am working on will be suitable for them. There are some guidelines that you need to follow to meet the letter of the law. These are not difficult to do, just a checklist that will keep you out of trouble.
Having a coalition of investors will enable you to take advantage of opportunities that arise, and will help you go forward faster than you could have ever done without having a cadre of lenders.
Quick note, I am hosting a webinar on Wednesday March 18th at 6:30pm talking about this very topic. I recommend that you attend. It will be an information filled 60 minutes that will help you accelerate your real estate investing business. Check it out at www.CrackingTheVault.com/webinars.php
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