Private Mortgage Investing: How to Find Hard Money Deals

“If opportunity doesn’t knock, build a door.”
– Milton Berle

PMI How to Find Hard Money DealsThis week, we continue our conversation with Marc Sherrin, one of our preferred referrals for our clients who invest in bridge loans. (Sometimes also known as “hard money” loans,  usually for the purpose of rehabbing or flipping homes.)

Marc has been in the business of private mortgage investing,  for many years, and he was kind enough to answer some questions to help guide those inclined to find their own hard money investments.

See last week’s post for the first part of this series, “Hard Money, Hard Lessons: 3 Private Mortgage Mistakes to Avoid.”

Kim Butler:  Where do you find loans? How do you begin the search process? How do you find the “good” loans, or how do you find loans then do your due diligence to know that they’re good?

Marc Sherrin:  There’s two kinds of work when you’re doing this. There’s the management and maintenance part – working to maintain and service your deals so that everything is being properly managed and supervised, so that the deal is continuing along the path of your desired outcome. And, as difficult as that sounds, finding the right deal is often the harder part of the work. Remember, you are looking for the deals that you think will have the greatest potential amount of success. This is where the work happens!

The way that you can start to find the good deals – or know a good deal when you see one – is by just simply seeing a bunch of deals. There are three ways you can find deals.

1.)  First, in whatever city you’re in, there’s probably a real estate investment group , club, or association that’s having weekly or monthly meetings. These are big groups where people come looking for knowledge, deals, work, and/or funding.

These are an excellent place to start seeing deals, seeing how others are doing deals, and a low risk arena to learn and observe. And if you’re a lender, a money person, you’re going to be more rare than someone who rehabs houses and is looking for more work.

Kim:  So, you’re talking about meetings of realtors, mortgage brokers, real estate investors

Marc:  These are real estate investors, usually as green can be, pie in the sky dreamers who think that they can get rich quick in real estate and also, quite frankly, people who’ve tried before and failed.

And then there’s some winners in there too. I did this when I was brand new and I didn’t know what I was doing at all. I would show up and just be a part of these meetings, so A) I could observe, see what they’re talking about, how they’re going about their business B) I’d see a wide variety of people, investors and borrowers, also different types of deals.

It’s a better strategy than taking an ad out on Craigslist and saying, “Hey, I’ve got money. Who wants some?” Then the crazies come out of the woodwork.

Now, eight out of ten deals you see at one of these meetings are going to be trash, or they’re going to be people that are living in their parent’s basement and they just got this dream and they found this house and got it under contract somehow, and they think that if they could just find the money, then they know they’ll make money – even though they’ve never done a rehab before in their life!

And, some of those guys actually might do well, but if you are successful in your own business or you’ve managed employees, then you’ve realized that, “Hey, this person doesn’t work well in this situation, but they work better over here.” Or perhaps, “This guy’s not a great salesman, but he’s a great manager.” You start to see what people are capable of and where their real strengths and weaknesses are.

It’s the same kind of thing when you show up at one of those meetings and there’s a guy that has a deal, but he doesn’t have anything else. But there’s a construction guy who’s slow right now and he’s a good source for the work and he’s managed projects before. So sometimes when you’re looking at a deal, you’re not just looking at an obvious deal. You’re looking at these borrowers and realizing, “If you teamed up with this guy and you teamed up with that guy and you all had something, then you’d have a stronger deal than if one of you were just trying to do it on your own.”

This is the first thing I would do – find meetings of people that are discussing deals like this – and they’re usually real easy to find. Start by using Google to look for “real estate investment club (or group)” or “real estate investing meetings” in your area. Also, if you have realtor friends, ask them if they know anybody that is active in real estate investing, and go from there.

2.) A more labor intensive way to find deals is to drive around neighborhoods that you want to be a part of. Look for people that are actually doing the work, then go up and talk to them and ask them where they’re getting their money and what kind of rates they’re getting on their money. Let them know you’re a lender and you would like to lend in this area, and you’ll find out very quickly what rate and terms they are getting.

If they say, “We’re getting 5% money.” Do you want to lend at 5%? Then that’s potentially someone you can lend with and if you decide that you’re lending at 10% or 12% or 15% or 18% – whatever it is that you’re doing –you could tell them, “Hey, I’m a private lender, but I’m charging this much, and if you ever need money then here’s my contact information.” You might not hear from that guy for a year, but it’s a long game.

3.) Then, if those things aren’t working, then I would talk to your mortgage friends – or mortgage broker friends – and tell them that you are going to be lending on whatever type of property that you would like to be involved with. Then you’ll spend your time with those people doing coffee, gifts, lunches or swinging by, e-mails, or however it is that you feel is best to contact and talk to those people.

If you’re still not getting the borrowers you need, start going to realtors’ meetings. There’s usually a realtor breakfast meeting every day of the week in the area that you live in. Just show up at one of these, and then you meet everybody you can and say that you’re a private lender looking to fund real estate loans and, if the realtor can’t get a traditional mortgage done on one of their deals, then you would like to be considered as an option.

If you do that with the realtors, I guarantee you – remember how I said don’t fall in love with your first deal? – you will see TONS of deals, and you’re going to spend a bunch of time figuring out how to tell people, “No.” But eventually, you’ll get one or two deals that you want to do.

It’s a long, hard road to become known as a lending source, but once you start doing that – and you do it well – then you’ll obviously have referrals.

Kim: Thanks for all of the great information, Marc! I knew there was a lot involved in finding your own bridge loan deals. Sounds like it’s a big learning curve, but probably quite rewarding, eventually.

Do you want a SHORT-CUT to investing in Hard Money Notes and Mortgages?

We now have more quality loans available through an additional commercial mortgage company  for those interested in private mortgage investing. You can earn high, fixed annual yields, with short-term commercial mortgage notes. For accredited investors, we also have a 5-year private equity fund available with rates of return in the low double-digits. Some of the benefits:

  • Earn immediate, high yield income.
  • Payments come directly from the company – not the borrower.
  • Your money is protected by a hard asset collateral.
  • Loan-to-value never exceeds 65%, and is often lower.
  • The company maintains a second-lien position – behind you!
  • Get started lending with as little as $25,000 in a secured, first-position note.
  • Get a better rate through us than if you go directly to the company!

Want more information? See our article, “Bridge Loans and Hard Money: An Investment Opportunity?”  You can also opt-in below for additional information.

Next, contact us to get all the details  and see if this investment opportunity might be a fit for your situation.

Like the idea of doing it yourself? We’ll have even MORE great advice on hard money mortgage investing from Marc coming your way. If you want to make sure you don’t miss it, make sure you’re on our mailing list. Just enter your email below and you’ll receive updates and articles on alternative investments, including bridge loan investing, from Partners for Prosperity, LLC.
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