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It Takes A Network to Build an Investment Portfolio

There is a lot to be said about the power of networking. As many real estate investors say, “your network is your net worth.” English poet John Donne famously said it this way, “No man is an island, entire of itself.” The simple truth is it is tough to be successful when isolated from others. And, as with many great endeavors, it takes a network to build an investment portfolio. 

This article covers my foray into private money loans and my second wholesale purchase. Both were made possible because of my real estate investment network. Let’s start with how I found the property. 

Another Wholesaler Comes Through

On 12 December, I received a text message from a wholesaler with another opportunity for a three-bedroom, two-bathroom, 1,358 sqft single-family residence on a large lot and at a great location. On the 13th, I let the wholesaler know I was interested. We exchanged more information on the 14th, and I made my initial offer on the 15th. By 16 December, we had a signed agreement and a closing date of 30 December. We later pushed our closing to 5 January 2023  because of the holidays and a delayed title search.

This deal is the second such opportunity that has come my way since I began making a concerted effort to build my network of wholesalers. I wrote about my first wholesaler experience in my article, “Build Your Investment Portfolio With Wholesale Real Estate.” 

My efforts began in earnest at the beginning of 2022. Whenever anyone reached out to me about purchasing one of my properties, I texted them to say I wasn’t interested in selling, but I might consider buying. I even created a web page in May of 2022 that I refer wholesalers to when they call or text. 

Here is an example of the text I send them. 

“Hi, [Name], and thanks for your interest. If you check out the below link, you will see where I stand with selling.

If they visit the link, I explain that I receive numerous calls about my properties, so it is easier to refer wholesalers to the provided link. I also invite them to add me to their buyer list, and I even supply a description of properties that interest me. 

If you’d like to learn more about wholesaling, please visit my article, “Build Your Investment Portfolio With Wholesale Real Estate.” Or support this blog by purchasing one of the books listed below.


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Network With Private Lenders For Speed

Negotiations for this property proceeded quickly. Yet, it could have moved faster since the sellers needed to close quickly. My issue was I needed 100% of the funds at closing. Of course, one of the drawbacks to being a real estate investor is that while growing property rich, I’m often left cash poor. Moreover, a real estate purchase and rehab I completed several months earlier meant purchasing the property alone would be challenging.    

Technically, I had the capital if I sold my stocks, but I did not want to sell them, nor did I want to risk not having them liquidated by closing. Furthermore, even if I sold them, I needed more to cover renovations and repairs for the new property. That made the purchase a risky move.  If I was going to move on the property, I needed to find additional funding. 

Hello Private Lender

As it happened, I remembered a conversation with my old property manager a few years earlier. I’ll call him Gordon. He is one of the reasons I got into real estate investing in the first place, but that story is for another time. Needless to say, I hold Gordon in high regard and value his advice. 

Back when I reached out to Gordon about my real estate investing aspirations, I was transitioning from the U.S. Army and settling in Augusta, Georgia. Gordon told me he had moved away from real estate investing and towards private money lending. As with many successful real estate investors in their later years, Gordon accrued substantial capital and decided to use it to support other investors as a private money lender. Doing so also allows him to generate income from his wealth. 

Remembering that conversation, I decided to reach out to Gordon and see if he was still offering private loans. I told him I was considering financing up to 50% of the purchase price and what that amount might be. I also let him know I could provide more details if the opportunity sounded interesting and if he was still offering private money loans. 

He was interested and gave me a call. We reviewed some information about the property and discussed his terms, which turned out to be incredibly reasonable. All total, our collaboration took a few emails and a phone call over a day and a half.


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Private Loans

This property offered my first venture into private money loans. I found the process exciting since I’ve wondered about the process for a few years now. With that in mind, I’ll provide some details in case you are also interested.

How Private Loans Work

A loan from a private lender works just like a loan from a bank or credit union. If you are curious about how those work, see my article, “Anatomy of a Mortgage Loan.” And just like a conventional loan, you receive funding to buy a property, make a purchase, consolidate debt, make renovations, pull out cash, or cover other expenses.

The security you provide the private lender is usually the property you are purchasing or another property in your portfolio. We did discuss leveraging one of my other properties, but in the end, it proved more straightforward to group everything with the property I was purchasing.

You then pay the amount you borrowed back in installments with interest. That’s how the lender makes money.

Benefits of Private Loans

Another essential benefit of private loans is the speed at which they can be completed. With my private lender, the process took days. With my previous conventional and VA loans, the process took 30 days or more. So private loans are outstanding since they allow you to access funds quickly and without all the paperwork and credit checks that come with conventional loans.

Of course, interest rates tend to be higher than conventional loans, and the loan period tends to be shorter. But that is the tradeoff with private loans, and you can consider conventional loans later once the property is yours.

The process is not complicated–at least in Georgia. If you are considering a private money loan, make sure you go over the process with someone familiar with it. 

The Private Loan Process

Gordon wrote his Loan Terms Letter and shared it with me to start the process. I learned from our conversations that he had his lawyer help him determine everything that needed to be included in the letter. If you are considering whether to offer a private loan, I recommend you do the same. Rules in your state may vary.

Next, after I agreed to purchase the property, I had the wholesalers put me in touch with the pre-closer, who I then put in contact put Gordon. He forwarded his letter to the pre-closer, and the attorneys handled it from there. Here are some items included in the letter: 


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Loan Terms Letter Details

  • Date
  • Terms of Loan:
    • Closing Date
    • Lender Name or Company
    • Property as Security: Property Address
    • Buyer(s) Name
    • Loan amount
    • Interest rate
    • Amortization rate (e.g., 5-30 years)
    • Balloon payment due date: Gordon specified 35 Months
    • First payment’s due date
    • Payment’s due date and late fee.
    • Notice that the loan is to be a first mortgage and that the closing attorney must ensure there are no other leans on the property.
    • Requirement for the attorney to designate the loan as a Perpetual Loan
    • Requirement for the closing attorney to provide closing documents to the lender for review and approval 24 hours before closing
    • Requirement for the closing attorney to provide an amortization schedule with closing documents.
    • Requirement for interim interest, if applicable, to be paid to the lender at closing.
    • Requirement for the buyer to purchase lenders title insurance and provide a copy at closing
    • Requirement for the buyer to purchase homeowner’s insurance on the property and list the lender on the policy
    • Requirement for the insurance binder to be provided to the lender at closing and provide the lender the policy renewal annually
    • Requirement for the buyer to pay property taxes and provide the lender with a receipt of payment
    • Authorization for the buyer to pay off the loan early but with a guarantee to still pay one year’s interest on the loan
    • Details for where to send payments and contact information


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A Strong Network Closes

With the above information, the closing attorney (it may be a title company in your state) created and added a Promissory Note and the Security Deed to my closing documents. Gordon and I received the documents for review about two days before closing. We continued receiving and reviewing these documents until our signing day, but everything came together, and I closed on 5 January 2023. 

Read Your Contracts Carefully

At this point, I am obliged to offer this public service announcement. Always read your contracts. Request all documents in advance and scrub them. For instance, in my Security Deed, I noticed it said that I agreed to move into the property and establish it as my primary residence. I did not agree to that, so I had the attorneys strike those statements from the contract. Had I failed to do so, I would have been in breach of my contract in just 30 days. 

Because of our prior diligence, the signing went smoothly. A notary came to my home, and we completed the signing with the attorney witnessing the signatures online. Once signed, I scanned all the documents and sent them to the attorney and the notary. I sent what I signed to Gordon for his piece of mind as well.  

With signatures complete, I added a new rental to my portfolio and headed to the property to have all the locks rekeyed.   

Final Thoughts

As this article shows, it takes a network to build an investment portfolio. Over the past two years, my network has grown, allowing me to find more great deals. I learned of this deal by networking with a wholesaler. I was also able to purchase it because of my lender. Better yet, I now have the reserves needed for repairs and renovations. 

Since I mentioned renovations, my network will likewise play a role in that process. I’m turning the property over to my property manager to renovate and rent. I’ll write about that in another article. Nevertheless, my network is critical to my success as someone who invests after hours.

Note also that I created a very safe investment for my lender. By placing a 50% down payment on the property, I have provided my lender with reasonable assurance that his money is safe with me. For instance, if he has to foreclose on the property, he has every expectation that he can recover his money plus fees from the sale. I also have substantial skin in the game, so I’m not likely to walk away.

I hope that motivates you to build that contact list and add yourself to those buyer lists. Good luck, and happy investing! 

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How did you like this article? Was it helpful? How do you leverage your network to secure great deals? What questions do you have about this process? Would you like to join my network?

Leave your comments below, and thanks for reading!


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