Lenders and borrowers have a symbiotic relationship, needing each other to survive. As such, finding potential borrowers and securing deals is the key to continued success for a private lender. This is especially true in the real estate investment industry, where large loan amounts and increased risk are standard.
However, if you’re a private lender looking for potential borrowers, one comforting fact is that many real estate investors who need loans are also looking for you. You simply need to facilitate connections and demonstrate why your lending services are the ideal solution for their needs.
In this article, we'll explore why many real estate investors choose to lend from private sources rather than financial institutions, whether you should opt for indirect marketing or direct outreach, and how you can meet and advertise to investors needing loans.
Understanding Your Value as a Private Lender
When you begin networking, you'll find that there are also several real estate investors conducting outreach to find private lenders like you. Examining why this is the case can be incredibly helpful when communicating why potential borrowers should choose your loans.
Though there are many personal reasons why real estate investors may choose to forgo loans from financial institutions, many decide to borrow from private lenders because they offer:
- Flexible terms
- Faster approval process
- Less stringent requirements
- Personalized service
- Creative financing options
- Higher loan-to-value (LTV) ratios
- Willingness to finance unconventional properties
- Ability to fund projects unattractive to banks
- Direct communication with decision-makers
- No rigid underwriting criteria
- Shorter loan durations
- A focus on asset value over credit score
Reinforcing how and why you offer these things during your advertising and outreach efforts will help you effectively differentiate your services, and establish yourself as a go-to lender for real estate investors who value flexibility and speed.
From the start, the more specific you can be about what you offer, the better your chances of finding borrowers who are right for you, leading to long-term and lucrative partnerships. Of course, it's always best to leave potential investors with a way to find out more, be this a link to your website or your email/number through which they can get in touch directly.
Advertising Vs. Outreach
Next, let's examine the two ways a private lender can find real estate investors: advertising and outreach.
What's the Difference Between Advertising and Outreach?
While advertising involves getting your brand's name out there in the hopes that borrowers will come to you, outreach involves going directly to them, often in a one-on-one situation.
Both methods require a lot of work, but advertising can sometimes feel like a shot in the dark. Outreach, on the other hand, can offer you valuable experience to improve your methods next time you meet a potential borrower, even if you have yet to land a deal.
Which Method is Best For Your Loans Service?
Just like banks and credit unions, the most common way for private lenders to find potential borrowers is through advertising, whether online or through more traditional methods. However, if you prefer to offer loans to a very specific borrower base, such as real estate investors, it can be trickier to effectively target such a niche group through ads. This is where the outreach methods we'll discuss in this article come into play.
Does Advertising Have Benefits for Private Lenders Working in Such a Niche Group?
Even though outreach is likely more effective in terms of finding real estate investors who need loans, does this mean you should cease advertising altogether? After all, marketing campaigns are expensive, and if they're not driving results, is there any point in balancing advertising and outreach for your loan service?
Although it depends on what works for your business, advertising can still have benefits, even if it takes a backseat to outreach in your strategy. These include:
Brand Awareness and Credibility - When you begin networking with potential borrowers, your chances of success are far higher if that individual or organization is already aware of your lending service. Additionally, suppose you've worked hard on SEO as part of your marketing strategy. When a potential borrower you've spoken to begins to research your loan service and finds you're the top hit on search engines, it'll instantly up your credibility and trustworthiness.
Catching Strays - Even if you take every opportunity to perform proactive outreach, there's still a decent chance that you'll miss some real estate investors who need loans. Running a traditional advertising campaign will ensure your loan service is as visible as possible, increasing the chance that potential borrowers you might have missed through outreach and networking will come to you instead.
Diversification and Growth - If, in the future, you decide to expand on your real estate loans and begin offering other loans or services, a list of leads gathered during your general marketing campaigns will provide the foundation for further outreach. As such, scaling your loan service and marketing strategy to match is far easier if you've already put the work into your advertising during the early stages.
This is to say that while we'll look primarily at less-utilized, more effective outreach to find high-quality borrowers for your business, you shouldn't forgo traditional marketing altogether. If you have a team or are partnered with an advertising agency that can help sort through the inevitable interested borrowers who aren't suited to your lending strategy, this balancing act will be even more viable.
Ways to Find Real Estate Investors
Finally, it's time to examine some outreach techniques for finding and networking with real estate investors who need loans.
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Meet-ups and Conventions
Real estate and property conventions are the best places to meet and network with investors and others in the industry. The IMN Winter Forum On Real Estate Opportunity & Private Fund Investing, RETCON New York City, and the America Property Exhibition (APEX) are a few examples.
Of course, each of these conventions caters to a slightly different market, allowing you to network with specific investors depending on which you choose to attend. For example, if you're looking to invest in commercial properties, the ICSC events will be a great place to find potential borrowers. Or, if you're more interested in industrial properties, I.CON is the convention for you.
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Real Estate Investment Platforms
You can efficiently perform outreach online if there are no meet-ups near you or you're too busy to travel. Crowdfunding real estate investment apps like Fundrise and the online communities around it on Facebook and Reddit offer access to pools of potential borrowers. On the other hand, you can sign up as an originator on lending sites like Yieldstreet. One benefit of lending apps is that they often do much of the due diligence for you. However, you will have to give a portion of your profits to the app in exchange for access to potential borrowers.
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Public Speaking and Thought Leadership
An effective way to combine marketing and outreach is to establish yourself as a thought leader in the real estate investment industry. As a private lender, you likely have a unique perspective on real estate investment, and industry newbies looking for guidance will greatly benefit from your assistance.
There are a couple of ways to land public speaking gigs. The easiest is to go through established seminars and conventions and put your name forward as a potential speaker. The other more labor-intensive option is to create an online presence centered around educating those in the industry. You can host your own virtual seminars and courses and advertise your loans through these informative offerings.
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Working with Real Estate Clubs and Associations
It's helpful to join real estate investor groups to find potential borrowers, gain valuable insights about the industry, and research what investors look for in a private lender. Associations like the National Real Estate Investors Association (National REIA) will help get your name out there. However, joining groups and associations in your local area is probably best, especially if you prefer to meet face-to-face with borrowers.
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Partnering with Lenders and Realtors
Last but not least, partnering with another private lender means getting access to investors they've worked with previously. You can also combine your brands' reputations and networking capabilities to build a list of potential borrowers together. Partnering with other private lenders can also help you mitigate risk by sharing the financial burden of larger deals, making it easier to fund projects that require more capital.
Similarly, real estate agents in your local area are likely to have a list of investors you can contact directly through cold calls or emails. However, the best case scenario when working with realtors is to have them recommend you to investors who are struggling to get loans from other financial institutions. This will provide a steady stream of referrals with potential borrowers who are already assured of your credibility.
In Conclusion…
For private lenders, finding real estate investors who need loans often requires a two-pronged approach, combining advertising and direct outreach. The most effective of these methods, however, is undoubtedly the latter. Meeting with investors in person or online lets you connect with borrowers and create a more personalized service.
Focusing on establishing yourself as a credible thought leader in the industry, attending conventions, seminars, and meet-ups, and getting involved in online communities will significantly boost your visibility and reputation. Additionally, partnering with other groups will increase your chances of being referred to investors who are actively looking for loans.
Remember that success in this industry is built on relationships and trust. By engaging with the real estate investment community, and offering value through your knowledge and experience, you position yourself as a lender and a partner in your clients' success. Stay proactive, stay visible, and keep building relationships because personal connections will set you apart from the competition.
Sources and Resources
- https://lendsimpli.com/8-advantages-of-hiring-a-private-lender/
- https://newsilver.com/the-lender/private-lenders-vs-banks/
- https://medium.com/arts-marketing-matters/outreach-vs-marketing-part-one-d553c5d2609b
- https://medium.com/arts-marketing-matters/outreach-vs-marketing-part-two-205d6653a364
- https://www.linkedin.com/pulse/where-find-borrowers-your-private-lending-business-kent-clothier/
- https://royallegalsolutions.com/connecting-private-lenders-with-borrowers/
- https://www.housingwire.com/articles/why-digital-marketing-is-important-for-lenders-and-loan-officers/
- https://pdfroom.com/books/raising-private-capital-building-your-real-estate-empire-using-other-peoples-money/DkgV0QOR59B
- https://callporter.com/blog/private-money-lenders/
- https://www.youtube.com/watch?v=ZInBeeaHgk0
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