Private Money411 Magazine - The Source for Real Estate Finance Spring 2014 | Page 13

6 Tips for a Successful Private Lending Practice By Mark Hanf, CEO of Pacific Private Money five $50,000 loans than one $500,000 loan or even a $1 million loan! You can charge more points on smaller loans, plus the fees. They close quicker and easier. Larger loans fail to close at a much higher rate than smaller loans. Tremendous opportunities exist today for private money loan brokers. We found the following disciplines helped tremendously in growing a thriving private lending brokerage. Image: Alex Millos / 123RF.com Stay local. The private lending business model is most successful when you focus locally. Most of your loans should be within 100 miles of your office. Most of your private lenders will be local to your community. You will succeed in funding loans because you are a local expert and you understand your local marketplace. Remember that a reputable private lender is really in the investment business first, and the lending business second. Invest in what you know and where you know. For example, we are Northern California-based, and we don’t spend time on most Southern California loan applications. Find your sweet spot. If the funding capacity of the majority of your investors ranges from $50,000 to $250,000 then market this range as your niche. Be honest with your referral network as to your sweet spot. Besides, a guy that needs a $50K loan will not be well served by a broker who regularly funds million dollar loans. Build your book of business by starting out small, creating volume, then working your way up to larger loans. You can earn more in fees by doing Realty411Guide.com Focus. Be specific in your advertising and marketing. Don’t say that you are “nationwide” and you fund “all loan types” and loan amounts. I guarantee you that brokers who market themselves as such do not have a thriving business. Strive for total transparency. If you check out our website you will notice that we don’t have pictures of skyscrapers or smiling people in suits shaking hands. We have pictures of actual deals we have funded. We have our names, addresses, pictures and email addresses for all the world to see. We use our direct phone number with area code so people know our business is located in the San Francisco Bay Area. Google us and you will find our detailed LinkedIn profiles. We’ve never pretended to be something we weren’t. Your authenticity and transparency will attract customers to you in a big way. Refer, don’t broker. We originate loans. We rarely broker loans to other brokers. But we refer deals PAGE 60 • 2014 almost every day. When a call comes in for a loa