A journey in raising Private Money?

[Victor Thompson]

Situation: 3 years ago, when we did our first fix n flip my partners and I supplied the down payment and seeing that we still had our corporate jobs we used bank financing to fund the rest of the deal and repair costs. Since then, we have moved on from banks to more real estate investor friendly lenders such as Lending Home while we continue to grow our PML (Private Money Lender) pool. This year our focus has been on scaling the business and over the last 6 months, we have gone from 5 contracts per month to 10 and our capital needs continue to grow. We have had success in finding short term (less than 12 month) investors to fund our flips for anywhere from 8%-12% depending on the deal. The challenge for us however is finding long term investors (greater than 12 months) to provide the acquisition capital needed for our buy & holds. A lot of people ask me how to raise private money and I have found the best way to do that is to let everyone know and to connect with others doing the same. How do I know this works, good question. Because we have been doing this over the past couple years and have successfully raise over $2M to complete over 75+ real estate transactions in Georgia and South Carolina.

Task: The task now is to significantly grow our long term PML pool first and then continue to grow our short term PML pool so that we have access to $500k-$1m per month. As I write this, I can’t help but realize how far we have come in such a short time. Also, I realize that there are most likely many other REIs (Real Estate Investors) in this growth period now or have recently solved the funding area of their business that can share their lessons learned for those not quite there yet.

Action: So what action did we take place to move on from traditional bank financing to get where we are today? Well, we started small with friends and family at first. Once those were tapped, we had enough deals and experience under our belt to look elsewhere. The next circles we went to for additional funds were our local meetup, friends of friends, and other investors in our mastermind. Having success making investors solid returns acted as a catalyst here and because our business was growing so fast, we quickly tapped and deployed all these new funds.

Now we are at a bit of a crossroads where we have a solid core of investors, but we need to grow the pool significantly. We could formally start a fund, but the cost and timing seem like we are not quite there yet. In the meantime, we set up a website, zerogravityrei.com, to put a face on our business and provide a platform to engage with our PMLs online. Now we are exploring other options and the most attractive thus far are to grow our self-directed retirement fund PMLs and dive deeper crowd sourcing options that connect directly to the investor.

Result: We have a nice pipeline of deals shaped up and are looking to gain access to anywhere from $500-$1m/month to fund our deals. We are averaging about 10 contracts per month and our exit strategies include: Flip, Owner Finance, Lease Option, and Rental.

Impact: We will source the funds because we have to and always find a way to do so. This is one of the most difficult challenges of being a business owner and one of the greatest sources of success, when you find a way to pull it off! Hopefully this post encourages other BP members to share lessons learned and additional resources, and shoot who knows maybe someone will even find a new PML source…

Regardless, cheers to raising all the private money you need for your deals!