Securing Private Funds for Commercial Real Estate Deals

As you may well know by now, private money funding is one of several options you have for funding a commercial real estate deal. The real trick is to know where to find such funding, and then to know how to lock it in so you can properly use it. I’ve used my share of private money over the years and what I've found is that private lending success comes from two key things: how you present yourself and how you present the deal. 

Presenting yourself to a private lender needs to revolve around your professionalism and your commitment to the types of deals you do. For this reason, a simple summary proposal is a nice touch, when you first begin visiting with a particular lender. In such a proposal, you can provide snippets of your business philosophy, history, experience, etc. You can also show examples of how you would handle a particular deal, giving a lending prospect a quick idea of what it is like to do business with you. 

There are several ways to put together a summary proposal and there are a similar number of things you could call it. The bottom line is that if your business is worth telling people about, it’s also worth putting in writing, and a person looking to learn more about you is less likely to want to read a full-blown business plan that is less relevant to their immediate interests. 

Once you have gathered some interest from private lenders (not to understate the importance of this step), the next step is to actually present a deal to them when one comes your way. How you do this will be very important, given that your credibility with a seller will be somewhat dependent on your ability to not only attract funding, but also have it when you need it most. 

When putting a project summary together, remember the key components that are important to you when you evaluate a commercial deal for your own business. First, there is the price tag, which should be competitive, relative to market value. Second, there are the market conditions, which should show some stability and also signs of good future growth. Last, there is of course the property’s cash flow, which should be acceptable to all parties involved. Once the basic elements of a deal are in place, then you can really dive in and start negotiating the terms of use for a private lender’s funds. 

Don’t ever forget that using private money is serious business, so make sure you have a good team in place to support your efforts, and be sure to treat a private lender’s funds as carefully as you would your own. These two things can really simplify the use of private money and open key doors of opportunity for your commercial real estate business.