Do you know how to make lasting professional connections with private money lenders and borrowers?
Many view borrowing private money as a fast and more personal alternative to acquiring funds through a bank. One such private money enthusiast is named Benjamin Fredricks of Daytona, Florida.
Benjamin recently joined the Private Money Club in order to make more connections with lenders and borrowers, but he’s no stranger to using private money to fund his investments. For the past five years, he’s successfully bought and flipped hundreds of real estate deals by working with auction houses and private money lenders.
Because Benjamin has experience as both a lender and a borrower, he’s uncovered incredibly valuable insights during his time expanding his operation. In this article, you’ll learn Benjamin’s guide to attracting lenders, trusting your gut, and the benefits of using private money.
Shifting Toward Private Money Lending
Benjamin Fredricks has made a successful living flipping real estate deals. He started his career working for the Lehman Brothers investment bank in the early 2000s, but the firm closed its doors permanently during the housing market crash in 2008. After that, Benjamin began working for financial services. Although he didn’t enjoy the experience, he learned an important lesson regarding accumulating wealth.
“I worked for New York Life and Allstate for eight years, [and] I hated every minute of it. Ultimately, it was during that time … I learned that I wasn’t going to build wealth in that way. I had to do it through real estate. … I knew [when] selling mutual funds to my clients … [that] most of these people [were] not gonna grow any kind of significant wealth.” – Benjamin Fredricks
Benjamin realized the best way he could accumulate wealth was through real estate investing. After this realization, he experienced a life-changing moment:
“The thing that pushed me … over the edge of saying, ‘All right, I’m leaving all of this behind. I’m gonna roll the dice and see what happens,’ [was] when my daughter was born. I was like, ‘I’m not gonna just be stuck doing something just because I [feel like I] need to do it.’ … So I was like, ‘If I’m gonna [invest in homes,] I’m gonna go all in.'” – Benjamin Fredricks
Fortunately, Benjamin was already passionate about real estate and owned a few properties. He began accumulating more properties the more traditional way, by putting down 20% out of pocket.
In addition to flipping deals, Benjamin sells properties by using seller financing.
“What I do [is] I’m borrowing money, but I’m also lending. … I’m using private money to acquire properties, and then a lot of times, I’m turning around and then selling those on seller finance after we’ve paid back the funds or refinanced with our portfolio lender.” – Benjamin Fredricks
Benjamin primarily obtains properties by buying them in bulk at auctions. He’s had much success flipping deals over the past five years, and today, he owns around 40 rental properties, and he’s closed between 500 and 600 deals.
Attracting Private Money Lenders
Through his time flipping deals, Benjamin has learned the value of borrowing private money rather than going through a bank. He used $150,000 in private funds to close his first package of deals at auction, and he used the momentum of this closing to make a living off of.
Although Benjamin signed up for Private Money Club, he already has many connections to private money lenders. His first private money lender was a friend of his partner’s family. Since then, he’s borrowed money from many private lenders, including friends and family.
In his time finding private money, Benjamin has learned important lessons in attracting lenders. When presenting your deal to a potential lender, you need to have confidence and transparency in the agreement:
“I’ve done deals with family [to obtain] private money, and it’s fine because … you lay your cards out on the table and [show them that] this is what it is and this is what you can expect. [You need to have] your ducks in a row.” – Benjamin Fredricks
You need to show the potential lender that you’ve done your homework regarding the deal’s intricacies, exit strategy, and timeframe.
Benjamin observed that social media is invaluable for finding private money lenders. Although Benjamin has borrowed from friends and family, he never approached them directly. Instead, he stayed active on social media and posted about his business dealings, which caught others’ attention.
“My family came to me not because I approached them. It was more because they saw what I was doing. Social media is a great tool for that. … If you use it in a way where you’re documenting what it is you’re doing — your wins, your losses, everything — people take notice. That’s essentially what happened to me. … I always just documented the process, and then eventually, the ones that were interested came to me organically.” – Benjamin Fredricks
Benjamin has many connections to private money lenders, but he recognizes the importance of having different avenues for private funding. Fortunately for him, he joined Private Money Club, which connects borrowers and lenders. He hasn’t borrowed funds from PMC lenders yet, but he always has that option.
Trusting Your Gut in Lending
In addition to having a great deal of experience borrowing private money, Benjamin also knows a thing or two about lending and some common pitfalls for beginner lenders.
When Benjamin first started selling properties through seller financing, he primarily focused on helping others who had fallen on hard times.
“In the beginning … I just wanted to be altruistic. … I wanted to be that guy that was helping somebody. I’m very proud of the fact that we’ve been able to do that a bunch.” – Benjamin Fredricks
Benjamin values helping others but admits that there were times early in his lending career when he went against his gut to make financial decisions, ultimately costing him money.
“There were times [when my] gut [was] like, ‘This isn’t gonna work out.’ [But] I pressed forward anyways, and sure enough, those deals didn’t work out. … Trust your gut when you’re dealing with somebody in any capacity but especially in private money.” – Benjamin Fredricks
Trust your gut when speaking with potential borrowers. If you have the sneaking suspicion that someone won’t come through with your money, you may very likely be right.
Benjamin observed that another critical part of finding the right deal is following data rather than emotions:
“I live by three words when it comes to a deal: Data, not drama. That’s it. Like, does [the deal] make sense? … I don’t get emotional about any one deal. I only look at the numbers. … If the data’s there, then you can go to your intuition — ‘Okay, how do I feel about this deal? Am I getting the right vibe from this borrower? Am I getting the right vibe from the security and the deal?’ And if you do, then you’re good to go.” – Benjamin Fredricks
When finding the right borrower, it’s also important that they have a clear strategy and plan to pay you back. This is especially important if the borrower is new to the world of private money. They need to be able to show you how the deal will work and their exit strategy for returning your money.
Benjamin also offered some notable red flags when it comes to borrowers:
“They don’t have a lot of [cash] reserves or … they’ve had a problem in the past with credit, [and] they haven’t shown that they have fixed that. … This was just a lesson learned early on. … If you fell down before, show me that you’ve gone through the effort to pick yourself back up again and you learned the lesson.” – Benjamin Fredricks
Everyone makes mistakes, and a good borrower may have struggled with credit at some point in their lives, but they must be able to prove that they’re the right fit for handling your money.
Benefits of Using Private Money Loans
Benjamin Fredricks is a major advocate for using private funds, and borrowing private money has enabled him to scale his rental and deal-flipping operation. He prefers working with people, even if it means having to pay a higher interest rate:
“It’s just so much simpler and faster. That’s what I love about it. I don’t mind paying somebody a higher interest rate than what I would pay the bank. And quite frankly, I’m grateful for it. Those are … my favorite checks to write because it means I’m growing.” – Benjamin Fredricks
Borrowing private funds expedites the process of receiving money, allowing Benjamin to close deals much faster than he ever could by going through a bank.
“The speed at which private money allows us to do deals has gotten me some of the best deals ever. As opposed to like, ‘Okay, well I gotta see if I can get financing and go through that process with my bank, where they’re taking 60 days.’ Or, I can [use private money] and let the auction company know, ‘Hey, I’ll take this deal tomorrow if you can give it [to me at] this price.'” – Benjamin Fredricks
Going through the traditional bank loan route can take a great deal of time, potentially jeopardizing a transaction. Benjamin uses private money in order to find and close deals faster.
Another reason why Benjamin prefers borrowing private money is because it positively impacts both him and the lender.
“It’s exciting when you [borrow from] somebody [who] isn’t in real estate, and they start doing deals with you, and you kind of see [that they] get that feeling that I get every day being an investor. [It’s like], ‘Oh, this is working?’ … They’re starting to see cash flow. … If we both generate cash flow together, it’s a win-win. And that’s my favorite part of working with private money people. … I’d rather give it to somebody than give it to the bank.” – Benjamin Fredricks
You create mutually beneficial relationships when you borrow money from people rather than the bank. Both Benjamin and his private money lenders profit, and he’s more than happy to work with real people rather than a bank.
Learn More About Finding Lenders and Borrowers Through Private Money Club
If you’re feeling inspired by Benjamin’s experiences and want to begin borrowing or lending private money, look no further than the Private Money Club. Although Benjamin has yet to borrow funds from a PMC member, he recognizes that making additional private money connections through PMC is crucial for expanding his operation. Private Money Club connects private lenders and borrowers to create mutually beneficial professional relationships.
Additionally, PMC provides club members with educational resources for getting started with borrowing and lending.
Ready to learn more about PMC benefits? Read more success stories on the PMC blog today!