Jeff Adams:
And on top of that you got money for rehab and you didn't have to pay five points – you know – $2-3,000 in garbage fees to theses hard moneylenders and that property really exploded your profit margins I would think.

Alan Cowgill:
Oh, yeah, it's huge. Plus, I had that contingency money that I borrow, which is another plus. You can't do that with a hard moneylender because with a hard moneylender you gotta walk into closing with 15 percent down. They're going to want you to have money down on it. They aren't going to loan you their money, they're going to want you to have money down. Plus, one of the things we ought to talk about is the rehab money. If you're doing business with a hard moneylender they're going to give you the rehab money but they're going to escrow it. And so what happens is when I go to close to buy a property with a hard moneylender, or like I used to – I don't do it anymore, but you have to walk in with 15 percent down. You walk out with no money and then you gotta go fix your property.

So you start putting some more of your own money into the property and then once you reach a certain level, you call up the hard moneylender, they will send in an appraiser, which you pay for as a real estate investor, and if you've done the work on the property, the hard moneylender will start releasing funds to you. And eventually you will get all your money back but the house has to be completed before you get the rest of it. They kind of hold your money in ransom and you're paying 15 percent or whatever the hard moneylender is charging on that until you get the rehab done and you're having to start it with your money. Now with a private lender it doesn't work like that.

With a private lender, the day I buy the property I walk out of the property with a check. And the check is for 100 percent of my rehab and my contingency money. You see, what happens to me, if I want to buy a property and let's say I'm going to buy a property for $50,000. And it takes $15,000 in rehab costs that is up to $65,000. I'll just call the private lender up and say I need to borrow $70,000. I don't tell them how the money is divided up. And so when I buy the property I got enough to buy it, I got enough for the rehab and then I got, in that case, $5,000 extra for contingency money.

Jeff Adams:
Wow, that's fantastic.

Alan Cowgill:
Yep. Yep.

Jeff Adams:
So you said earlier you find your prime lenders between ads and you use a mailing company that gives you names?

Alan Cowgill:
Yeah, a list broker.

Jeff Adams:
How else do you find your private investors?

Alan Cowgill:
Well, the first private lender was my mom. And what I found is that you can borrow money from family, friends and associates. And that is a huge reservoir of money and we ask for referrals, so let me share with you – we created a list of 90 names of family, friends and associates here in my office. And what we do is we send them out a postcard every Monday for three weeks in a row – some of the folks might want to take notes on this. I'm giving them a goldmine idea right now.

We send a postcard out to them for three weeks in a row and then on that third week, on a Thursday, we call all 90 folks up. And we invite them to a luncheon the following week, and so here is all your family, friends and associates that's been invited to this luncheon on week four. So what we do is we get confirmations, and what we had was we had 34 folks sign up; we had 27 folks show up. You're always going to get some attrition on this.

Jeff Adams:
Okay.
Alan Cowgill:
And everybody just needs to realize that. So they came to the luncheon, it was one of the best luncheons we ever had and also it’s the best referral group that we ever had because they're going to be supportive of us and then they also like what we do – we put on a profession luncheon like I was talking about and they will refer other folks that they know. And so it is a huge, huge way to find private money and it’s the cheapest. You aren't having to run an ad and send out postcards so it's just another –

Jeff Adams:
That sounds great.

Alan Cowgill:
It's – it's just another option out there.

Jeff Adams:
That sounds great.

Alan Cowgill:
Yeah.

Jeff Adams:
So have you ever had an investor quit investing with you?

Alan Cowgill:
Doesn't happen very often. Had a couple. But what happens is – you know, one of the big fears that real estate investors has is oh, my what happens if they've got money out on a property and they want their money back and the house hasn't sold yet or the property hasn't sold? Well, it's actually very simple. Its just a phone call and you just have another private lender come in and you pay off the first private lender and they're fully satisfied and the new private lender then gets a mortgage and a promissory note and hazard insurance and lender title insurance on the property and you start paying them.

Jeff Adams:
Yeah, it sounds like an easy deal there.

Alan Cowgill:
Yeah and it's – and I don't have a lot. People worry about that, but I've never missed a payment with one, I've never been late and everybody – you know, I just take care of my private lenders and they're great folks and they're tickled with the high rate of return that they can't get hardly any place else so there's no reason for them to go someplace else. The only reason I've seen folks not come back is if they want to use the money to go buy a property for themselves so I've had a couple do that.

Jeff Adams:
Now I'm sure you get asked this question all the time. You know, you've bought and sold 40 houses last year; you have a lot of money now, why would you still use private investors?

Alan Cowgill:
Well, you can make – you know I don't – I – the bad things we talked about on a hard moneylender to where they're setting the rules and they get a high rate of return and they charge points? That's the way I loan my money out. I don't loan my money out the way I borrow money. I borrow money from a private lender because it’s the availability of cash and I want to keep my own cash liquid at some – some of it. And then I also want to get a high rate of return on the other part and so I just loan it out at a higher rate. To other folks.

Jeff Adams:
Okay. Sounds –