Private Financing - Professionals Update

Susan Flanagan

Susan: To let people know with private money, I think the first thing to remind people of whether you're a seasoned investor or a new investor, private money is something that you should get familiar with because you're going to need it. If you're going to continue to grow your portfolio, you're going to get to a point where you can't use the banks and you're going to need private funds. That's where somebody like myself can come in.

My brokerage is very specialized. That's all we do is private lending. For myself, I'm also an investor. I work both sides of the coin. I'm also boring private money at times. I'm also lending out my own money at times, as well as lenders that are part of a brokerage. I'm one of the things that right now is heading into 2021. I think one of the things that everyone has to pay attention to is to listen, we've been on a whirlwind, right? With all these multiple offers and stuff in the marketplace, it is slowing and we are going to head into a slump. There is no doubt about it.

From the perspective of being a savvy real estate investor, you want to think ahead that way. And so there's two points that I'd like to suggest for people at first off, be thinking. That you can be purchasing properties when the market slows, but also if you already have properties that you could be refinancing right now, because the interest rates at the banks are incredibly low, this is the time to do it. And where I can come in is not necessarily.

Anybody where you can go and get private money. It's worth your while to look at. Let's say you're overextended right now with your credit and so forth and you're going, oh, I can't get refinanced. Then think about taking out a second mortgage, get your finances all straightened out, get your credit rating back up and then turn around, get it refinanced. And now, you're in a way better position as the market starts to slow down in the next few months.

Another thing to think about, there's so much that you could be looking at right now, but private money is not something to be afraid of. It is much more expensive than bank money, but there's very good reasons why you'd use it. I work with most of my clients who are other real estate investors, flippers. People that are flipping houses are a big component. People like I was just saying to do the refinance. If you're buying a house that needs work, the bank won't touch you at the beginning. There's just many reasons why you should be considering private funds.

A first mortgage is going to be more expensive than going to the bank. Of course, right now, if you are a top-notch client in the eyes of the banks. You can get a mortgage at under 2%. If you're going to use a private first mortgage is probably going to be around 8%. That's a big difference. However, it gets you into the project and then you can refinance later. I just suggest to people, if you're not sure how to use private money, book a time with me.

Let's talk about what your scenario is, and I'll give you all kinds of ideas because I've been there. I am there as a real estate investor, I've been using private money for many years. I can help you, navigate some of those other things to think about.

Sarah: Private money is always going to be something at some point as we're scaling that we're going to need access to. If you don't need it now, I still would suggest having that conversation with you because then knowing that they have access and what the terms are going to look like. What you can get as a loan or potentially even as, you might have RRSP money and you want to loan it out. As an example, you go both ways. It can go for borrowing, or it could be for lending, but have some good private money lenders on your side.

Whether it's for now or for the future, you will need it at some point. Imagine if, for example, this awesome deal that you guys find and the bank red flags, it's because they're like waters and water in the basements. And they don't want to, lend on it or you've got a great multifamily property and your goal is to refinance it and it's half empty the banks. We're probably not going to give you the loan that you want.

There's lots of different strategies and ways that you can start with private money. Use that, utilize it and then stabilize the opportunity and then you can go with a conventional lender. Susan, you've been around in the industry for a long time. Are you seeing more people wanting to loan, more people wanting to borrow these days? What are some of the trends?

Susan: Actually, both are happening at the same time. Like I am so busy, it's unbelievable. As the podcast was starting up, I'm still sending off documents on a file right now and stuff. Yes, both ways people are, I think because knowledge is, people are getting more knowledgeable about the use of private money.

It used to be a bad word many years ago that, oh my gosh, you had to be some type of really bad person. If you needed private money. That is not the case at all. I could tell you, there's so many different reasons and as an investor, you're right. We need to think about it for a project because you'll get stopped in your tracks at some point, because you cannot get any more money from the bank.

And another thing I will suggest to people. You need to weigh out the differences. Is it cheaper or easier or better for your situation to use private money or to do a JV partner? Because I'll tell you JV partners are great, but you're giving away a lot more of your equity than you need to. If you could be doing it with private funds instead, again, something to think about and to brainstorm on. And that's what I mean.

I spend a lot of my time on the phone with investors and we just go through their scenarios. I had one today, it was unfortunate. Like she had the wrong idea that she thought she could get a hundred percent financing. She did not have any money. And I went well, but she also did not have a property that she could pull money from. Sometimes people have the wrong idea in a bad way, but if you don't know how it works, you need to find out now I'm here for you.

I'll put my information in the chat. If anybody wants to get ahold of me, yeah, and we'll go and go from there. But Sarah definitely on both sides of the coin, private money is so needed in the marketplace right now. And also many people are recognizing it's a way to also be a passive investor.

Sarah: Diversifying is important. I do it myself as well. You utilize registered funds, correct? RRSP. All of that stuff, whether it's cash or it's registered funds. You know right now, personally. For me, I don't want to have a whole lot of money in the stock market or mutual funds. I'd rather bring it to community trust or Olympia trust and loan it out because I can dictate the terms. Guys reach out to Susan. If you don't have a good private money or you don't have a private money person on your side, Susan will put her contact information there, Susan, thank you so much.

Susan: Thank you, Sarah.