How to Use Private Money to Launch Your Assisted Living Business
Jul 15, 2024
Private money can be a vital funding source for your assisted living business. When you leverage private money, you receive funds from private individuals or groups willing to invest in your venture. For instance, private lenders might offer interest-only loans for a short term, typically 12-18 months, providing the necessary capital to acquire and renovate your property. This approach can be especially beneficial if you face challenges securing traditional bank loans due to stringent criteria.
Learn more by watching the video:
;
What is Private Money?
Private money refers to loans from private individuals or groups rather than traditional financial institutions. These lenders may pool their resources into a fund or operate independently. They assess potential investments based on your personal credentials and the specifics of your project, offering a more flexible and accessible funding option compared to traditional banks.
How Private Money Works
- Application Process: You submit your project proposal to a private lender, who then evaluates it based on their criteria and your personal and project credentials.
- Loan Agreement: Upon approval, you receive the loan, often structured as an interest-only loan for a short period, typically 12-18 months.
- Refinancing: At the end of the loan term, you refinance the loan through a traditional lender, transitioning to a more stable, longer-term financing arrangement.
Private money loans usually come with fewer hurdles than traditional loans, making them a viable option for beginners to build experience and credibility.
Uses of Private Money in Assisted Living
Private money can be used for various purposes in your assisted living business, depending on the lender’s comfort level:
- Real Estate Purchase: Private money is commonly used to buy the property for your assisted living facility. Lenders feel secure as they hold the first lien on the property.
- Renovations: Funds can also be used to renovate and prepare the property to meet the needs of your residents.
- Operating Capital: While obtaining operating capital through private money can be challenging, you might explore other sources like business loans or unsecured lines of credit for these needs.
Finding Private Money Lenders
Finding private money lenders involves networking and leveraging various resources. Here are some effective ways to connect with them:
Real Estate Meetups
Attend local real estate meetups. These gatherings are great for networking, and you might find investors or get referrals to private money lenders.
Personal Network
Don’t overlook your personal network. Friends, family, or acquaintances might have the funds and interest to invest in your project.
Mortgage Brokers
Mortgage brokers are valuable resources. They often have connections with private money lenders and can introduce you to potential investors.
Self-Directed IRAs
Some individuals use self-directed IRAs to invest in real estate. Research this option as it can open up additional funding avenues.
Online Platforms
Utilize online platforms that connect borrowers with private lenders. These platforms can streamline the process and offer various funding options.
Maximizing the Benefits of Private Money
While private money can offer a lifeline for new assisted living businesses, it's crucial to understand the terms and plan your strategy effectively:
- Interest-Only Loans: These loans can be beneficial initially, but ensure you have a solid plan for refinancing.
- Building Relationships: Cultivate strong relationships with your lenders. Trust and communication are key to securing favorable terms.
- Diversify Funding: Don’t rely solely on private money. Explore other funding options to ensure you have the necessary capital for all aspects of your business.
Final Thoughts
Leveraging private money can be a strategic way to launch your assisted living business, providing flexibility and access to necessary capital. While it involves navigating different terms and building relationships, the benefits of securing funding and starting your business outweigh the challenges.
If you're ready to explore private money further and need a solid business plan to secure funding, download our Business Plan Checklist. This tool will guide you in creating a compelling business plan that can help you secure the financing you need.
Need help figuring out where to start? Join the next Roadmap Challenge and build your launch plan with me.
Show full transcript 👇
Transcript
00:00:00
Hi friend I am Brandon Gustafson I help new and aspiring Real Estate Investors launch their Assisted Living business in today's video we're going to be talking about how to use private money to start your Assisted Living business welcome to Assisted Living [Music] investing hey friend welcome back to the channel before we get into our topic for today's video which is talking about private money and how you can leverage that to start your Assisted Living business I want to remind you to get
00:00:29
over to the website Assisted Living investing. net you can get access to our free underwriting calculator which is going to help you out in your investment journey and really give you some guidance on how to get started so make sure you go and grab that calculator again it's an assisted living investing dunet we will link that down below now let's talk about our topic for today which is how to use how to leverage private money to start your Assisted Living business first let's talk about
00:00:55
what private money is private money is coming from uh private individual ual and this could be a group of of people but basically you have you have a group of individuals they have money and sometimes they'll put this in a fund uh so you may have heard of a fund uh you may have heard private money lenders but essentially they are individuals that have enough money that they want to invest it in something and they will take that money and based off of who you are as a person and their specific
00:01:24
criteria and application process and things like that uh opportunities that are there uh if they're willing to invest with you um they will take that through their underwriting process make sure they're comfortable with you and if they are then they would lend you the money very similar to what you would be dealing with with a bank or a traditional lender so they they will give that money to you and then use it often times you're going to see things like an interest only loan um sometimes
00:01:48
they only want you to have that money for a year 18 months for a very short period of time relative and and let you kind of operate the business and then you would refinance out of it into a more traditional loan where it's really beneficial is if you're struggling to try and get that traditional lending money um from Bank SBA lender or something like that going the route of private money could be really beneficial because uh there's a lower level of criteria you could probably find uh
00:02:17
lenders there in the private money space that have a lower level of criteria than you would see with a lender or they're going to be a little more comfortable working with you um even with a lack of experience to get started so you can build up that experience that resume so you can go take that to the bank and get the refinance with some more stable um type of lending um opportunities there so just kind of an overview of what private money is and and how it works now let's talk a little bit about what
00:02:43
private money can be used for so this is going to depend on the lender and what their level of comfort is with them often times private money is going to be much more suited for the purchase of real estate for the purchase of of the building and that's because there's they're going to be be in in first position as on a lean um on the home and so it gives them some extra security so while you might be able to do less money down or things like that they're going to basically kind of be in control of
00:03:13
the property in the event that something defaults and and goes bad that's their security that's their way of securing their investment and making sure that hey things go bad at least we have this property we take it assume it and then we could sell it and and recoup a lot of our money and that could s squ sound very scary um when I was looking at this initially I was like oh man that that's scary when I thought about it a little bit more though I realized that's exactly what a bank does they go in and
00:03:41
they secure that property so that if you were to default they can repossess that home and sell it to make their money back it's the exact same process so it's really not that scary when you think about it and when you understand exactly how this goes because if you had a million dollars and you wanted to give it away to somebody to as an investment wouldn't you want to secure it as well like that's the thought process you need to go through as you're going through this so private money it could sound
00:04:07
scary hard money like all these things it might just be something they like uh I want to stay away from that in reality these are individuals and they're probably easier to work with and more friendly and they're doing the exact same thing a bank does in the way that they secure their their money so um that's something something to keep in mind but because of that they might be a little more hesitant to give you that extra operating Capital to get started so so that's something you also need to
00:04:31
be aware of if you need that extra operating Capital you need some extra funding to make sure that you can operate for the first few months while you're getting residents and home and things like that you might be able to find a private money lender that's willing to do that but also you might not because they're not able to secure that investment with anything else so they're giving you free money essentially and so you might need to look somewhere else for that that could be on secured lines of credit uh it
00:04:55
could be going to a more traditional lender and getting a business loan something along those lines but the private money might not be as willing to work with you and getting you that operating Capital that you need to get started so that's something you also want to be aware of as you go through the process of trying to secure funding that they could help you get the building and get the home even do some Renovations potentially operating Capital that's a little more squishy and you might not be able to get that so now
00:05:21
let's talk about how to find that private money lender Now you kind of know what it is and and hopefully feel a little more comfortable with the idea of doing it where do you go find them number one is going to Real Estate meetups um that's a really good spot to do it um you might not find that private money lender there but chances are there's going to be an investor that has worked with one before and they're going to be able to do that so networking in that way and also just reaching out to
00:05:47
your personal Network you might have people in your network that you don't realize have that much money and are doing this on the side you or have that money and they don't know what to do with it and they're willing to lend it out to you so you might have people in in your network you might have people in your family even that could do this um that that could help you out and have it be a more un untraditional um private money which is kind of what I did with my dad in partnering with him to to use
00:06:12
his helck to use as a down payment to get us our our home it was kind of a private money type of a situation where we had that money people can have this in 401ks so you could get online and look at self-directed AR and get some more information about that it's going to kind of help you along uh your journey and and figure out if that's a good way to do that you also could be looking at talking to your broker that's how I found my first private money lender may not I'm not working with them
00:06:37
but my broker is the person that introduced us and your broker is going to be able to help you find those people because they're going to be out networking building those relationships and help you know exactly who you should be talking to to help you along your investment Journey uh so Brokers are a great way for you to meet these types of people they're just an incredible resource I can't speak highly enough for finding a mortgage broker that's going to help you just along your journey
00:07:02
they're going to be a huge advocate for you and help you out as you're trying to get started on your investment journey to recap this video we've been talking a little bit about private money uh we talked at number one about what private money is and then we also were talking about um how it works how how does private money actually work and then third we talked about how to go and find that private money lender if you found this information first off like the video subscribe and ring the bell as
00:07:26
well so you get notified every time we put out this content so you you get I love helping people out and I want you to get notified if you have questions make sure you comment those down below because it helps me build out the content that's specific to your needs so make sure you're commenting here what you need help with and also get over to the website Assisted Living investing. net you get access to our free underwriting calculator when you go there you can also get the business planning guide which is a course that I
00:07:49
created that's going to help you out in building a business plan the business plan I use to secure over $1.5 million in funding also how to underwrite and make sure that you feel comfortable in your investment but also help A lender feel comfortable in your investment and what you're doing so you can secure that funding which is really really important I also have the accelerator course all over there which is a 12we path to owning your Assisted Living business I love coaching people love helping people
00:08:14
and if you look at that accelerator and you think to yourself I need some extra stuff with this reach out to me Assisted Living investing. net strategy and we can jump on a call and I can explain how my coaching program can go hand inand with the accelerator course and what that's going to look like and and how it's going to help you launch your Assisted Living business does residential Assisted Living sound interesting to you but you don't know how to get started at Assisted Living
00:08:39
investing. net we're here to help you through the process start to finish and launching your Assisted Living business I want to thank you for watching and remind you that it doesn't take a lot just a little bit keep going step by step by step I promise you that if you do and you're consistent and persistent you're going to be successful again thank you for watching and have a great day [Music]
Download Your FREE Calculator
Stay connected with news and updates!
Join our mailing list to receive the latest news and updates from our team.
Don't worry, your information will not be shared.
We hate SPAM. We will never sell your information, for any reason.