4 Tips To Raising Private Money

Passive investors look for two things: trustworthy investors and good deals.

There is a lot of money available too!

Individual retirement accounts alone have over $11 trillion (about a third of total U.S. retirement funds).

That doesn't include cash sitting in private savings or brokerage accounts.

Below are four tips that I used to raise over $19 million from private money lenders and equity partners to fund 200+ properties:

Tip #1: Integrity Above All, Even Profit

Be thorough, transparent, and do exactly what you say you will do.

When things come up that change your plans (and this will happen), communicate it with your lender or investors.

There have been many occasions when a flip project did not sell as quickly as I planned.

A few projects even went past the payoff date when the private loan was due.

By communicating the situation with my private lenders I was able to work out a solution, usually a loan extension, that worked for everyone.

Every one of those lenders continued to work with me on future deals.

Tip #2: Always Be Marketing For Funding

You know the ABCs of real estate are Always Be Closing.

Well, in order to always be closing deals you have to always be marketing for deals and dollars.

Regarding dollars, it includes banks, hard money, and private money.

Private money lenders and investors typically do not have offices advertised on Google or walk around carrying signs that they have money to lend.

Instead, they attend networking events to meet active investors and gauge their trustworthiness, professionalism, and experience.

As long as you follow Tip #3 you will build relationships with them that may lead to doing business together.

Tip #3: Don't Pitch on First Dates

When you first meet or talk to a private investor or lender do not pitch them a deal.

Most investors make the mistake of skipping relationship building and going straight into sales mode.

This is similar to asking someone to marry you on the first date - you just don't do it!

Instead, talk to them about their real estate experience and investing goals.

Talk about your experience and goals.

But whatever you do, do not pitch them a deal in this first conversation.

The way I typically ended the initial conversation is, "All of my deals are currently funded. How would you like me to send you the next deal to review?"

As long as you handled the conversation well you will get a 100% positive response to that question.

Tip #4: Have a Credibility Kit

After asking the above question, and assuming they said yes, offer to send them a credibility kit.

A credibility kit is a brief one to 3 page (shorter is better) overview of you, your company, and your experience.

This can be a PDF flyer or a page on your website - or even better, both!

A credibility kit serves two purposes.

It is an easy transition to asking for their contact information and it builds credibility.

I would include a copy of the Executive Summary of a prior deal, showing them the information they can expect to see on a future deal.

MARKET OBSERVATIONS

Rent rate growth continues to slow with in September YOY increase at 7.8%

Side brokerage makes second round of layoffs since June

Invitation Homes seeks $1 Billion joint venture partner to take advantage of shifting housing market

The Fed expected to increase rates by another 75 basis points

Average 30yr fixed mortgage rates up slightly to 6.94%

Originally Posted on Invested Agents.