I spend a lot of time traveling across the country working with new and experience investors. It's a joy and passion of my life to help them succeed. What I run into a lot is helping educate their team members (Realtors and Mortgage Brokers) about the true way to finance their investor's deals. With the financial markets recovering from a severe tailspin, they often find it hard to believe the we as investors can find properties at wholesale prices (70% of Fair Market Value or Less) along with being able to use other people's money to finance the purchase and not have to put 10-20% cash as a down payment out of the investor's pocket! I guess I've gotten good at teaching people on a weekly basis how to raise private money and overcome the incorrect notions of non-investor mindset individuals.
One of the biggest objections I get often comes from either the investor or mostly the realtor's insecureness in their inability to grasp the fact that people are willing to lend money out of their own pocket. So many realtors have such a hard time thinking "outside of the box" and if it wasn't taught in realtor school, then it must be illegal! I can't tell you how many times I've laughed or heard that when I've discussed taking over a property subject to, or owner financing or borrowing money. Sometimes I want to carry my Louisville Slugger with me to knock some sense or break the box on this conventional and outdated thinking, especially in a market like we are facing right now. There is so much private money available out there for investors. There are so many sophisticated and disgruntled investors willing to lend their money out for real estate backed assets that it's almost impossible not to find any cash if you truly use the techniques that I teach. All you really have to do is open your pie hole and start talking to people!
Bob Leonetti likes to teach people to go out and ask for free dessert. If you have a hard time asking for free dessert, it's going to be hard to ask for the deed to someone's property let alone ask someone you know if they might be willing to lend you $50K for a great deal! So many people are worried about "bruising" relationships or feel that they might be "begging" for money. This insecureness is really pathetic sometimes. People for the most part don't bite, and if you ask in the right way, there is no reason that you can't utilize and use your repore and relationships to grow your real estate business on an exponential level. After all, this is a business of working with people. You can't be a James Bond or a secret agent and ever expect to truly succeed in real estate by keeping a low profile and not educating people on what you do. I'm a big believer on
So how do I raise money? I'm a big believer on reaching out to as many people as quickly as possible. There are basically three quick ways that in roughly 20 minutes you can get the word out. Usually the first thing that I do when I am with a new student while I am out in their market is to fire up and post several Craigslist ads targeted at finding disgruntled investors along with searching for people who would like to make an above average rate of return on their investment. This costs absolutely zero and I have a plethora of ads that I rotate continuously publicizing the opportunity to investors.
The second way is probably the hardest for most new investors and on numerous occasions I've had to "shake" my students into actually doing this. We all use some sort of address book like Outlook (if you aren't you had better start) to keep track of our contacts. I demand that my students compile a list of people that they know, work with, family members or contacts throughout the investment community. People are so scared that they might offend someone that their delay in keeping or utilizing their contacts on a regular basis is the main cause for their delayed success. We use this list to send out an email blast discussing with their contacts what they are doing as investors. Some of the components of this email are:
How long they have been investing.
What they are investing in.
How they have an opportunity?
Outlining the opportunity?
Asking for the referral?
Students are often concerned that they don't have a deal and how can they ask people they know when they don't have something. I tell them that we are prospecting and we want to gauge people's interest so that they have financing available, allowing us to be able to structure holding costs, exit strategies, and offers on properties. If you don't know what you're financing or money is going to cost you on your properties, how do you ever expect to hit that target or maximize your profits? I often compare that to trying to hitting a moving target? One thing that I also stress to my students is that you are offering your contacts a GREAT OPPORTUNITY! It may not be for them, but where else are they going to find the type of returns that you can provide? The stock market? I think not! My students are always surprised at the amount of positive results that they receive and how they can generate so much working capital by just educating and offering the opportunity to their contacts.
The last tip is often the easiest. I just have my students add a quick two sentence blurb to their email signatures about how they are always looking for private investors to help fund more deals. This allows the investor to educate new email contacts along with re-stressing this over and over to their existing list of contacts without spamming them or crossing the line.
While there are many other ways to go about raising money (Private Placement Memorandums, luncheons, etc), I truly believe that these three tried and true means to raise private money work the best and cost nothing except time and a little energy to overcome some students hesitancy. After all, the proof is in the pudding with the amount of testimonials and success stories from using these techniques. What's sweeter? Using your own money to buy your lunch or having your lunch paid for! I prefer the later and I'm eating pretty well!
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