Help! How do I write a proposal for potential investors?

Question

I have an opportunity to purchase a piece of land next to my in-laws. I want to purchase the land and build a two story single family that could be converted into a two unit at a later date. Plus, we want to put a granny flat in the back. I am having an architect draw up plans and have been speaking with contractors. Unfortunately, we don't have the kind of money it will take to see it through. I have two potential investors that are highly interested, but want to see a proposal first and understand how we plan to make them money and pay them back. Since this is my first time doing anything remotely like this (thank you Bigger Pockets for motivating to bite off way more than I can chew!), I could use some assistance in understanding how to write a proposal and what info I need to include. Any insight and assistance is greatly appreciated.

Steve Hall · Answer

@Garvey Daniels

If you can't even describe the project to us so we can understand it, you should probably pay someone to create your proposal.

Also, if you've admitted here to "biting off more than you can chew", any potential investors will find this out eventually and you won't get funded.

Garvey Daniels · Answer

@Steve Hall @Andrew Kroupa

Guys, thank you for your feedback, and Andrew thanks for the article suggestions.

I hear what both of you were saying and take it to heart. That said, let me rephrase the question a bit different.

The property next to my in-laws has been taken over by the city and put in receivership. The receiver initiated demolition yesterday and expects to be done next Wednesday. They are tearing it down to just the land, leaving nothing behind. We would have to reestablish sewer, water, etc. The property is 10,216sq ft and is located in a desirable tract originally built in the 1970's. I have spoken with the CEO of the receivership and am working with his sales department to understand the price they will offer for the land. Current estimates are around $450,000, but they are waiting on more information before making a final determination. I'm working to be in early to take advantage before it is listed.

I have an architect drawing up plans for a two story single family that can be converted into a two unit. My wife and I plus our two kids would live in the down stairs and rent out the top floor. In addition, we want to build an ADU that we can rent out for additional cash flow. Our proposed house is roughly 3200sq ft with the granny flat at 900sq ft. Though, if the numbers do not pencil out, the granny flat can be a later addition. According to the contractors I've spoken with, to build from the ground up and implement what I am proposing is around the $180-225per sq ft mark. Using an average of $200sq ft for a 3200sq ft property (no granny flat) is $640,000 bringing the total, not factoring in all other costs (closing, insurance, etc.) to $1,090,000. Comps in the area for newly remodeled homes range from $1.2 million to $1.5 (with pool). Rents are generating between $1,100 to $1,600 per bedroom.

As mentioned above, we are thinking of living here and renting out the upstairs. However, sales in the area have been brisk and it may work better as a flip. A big determining unknown right now is the initial price of the land.

I'm speaking with banks and other lenders about land loans and construction loans, and looking to implement the BRRRR method so often discussed on BP to pay off the loans/investors and provide a return.

Given all this info, I do not have the means to fund a project of this scope on my own. I do have access to people that can. What I do not know is how to determine an accurate return for an investor and how to package it up in a proposal.

Steve, as an investor do you have examples you could show me of proposals you've received? What are you looking for when someone brings you a deal? I am listening to BP podcasts everyday and learning as much as possible, but given the time constraints, need to gather outside, expert advice. And, yes, I am, also, looking into having someone create the proposal for me.

Guys, thank you again for your time, insight, and forthrightness. It is greatly appreciated.

Andrew Kroupa · Answer

One of the most important factors about convincing someone to bet on you is to make it clear that they will walk away as a winner. You need to have your plan, multiple alternate versions of how your plan will still pay in the face of difficulty, and essentially that you know exactly what and how you are doing.

The main point is to provide value to them so they'll want to work with you. But, like Steve Hall said above, if you are in far too deep, maybe you should consider an alternate plan for this plot?

I did some Google-fu to help you out anyway: https://fitsmallbusiness.com/how-to-write-a-busine...

Further, here's one from BP: https://www.biggerpockets.com/blog/5-step-process-...

Help! How do I write a proposal for potential investors?

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