Can Part-time Real Estate Investors Get Private Money?
In a word: absolutely! But, let me explain more...
It's very common for real estate investors to start out on a part-time basis. It usually goes something like this:
You're working a full time job or running another business and you recognize the great wealth building opportunity that real estate investing brings. You begin looking at properties, making offers and a getting feel for how the business works. You soon recognize that financing your investment properties is a big part of the equation. Mortgages and hard money are very difficult to come by (and the terms are unfavorable). You realize private money is the best option for buying and selling, as well other entry/exit strategies (1031, etc.).
A problem arises in your mind, though: "will it be a negative factor for a private investor to place funds with me since I do not yet dedicate all of my time to real estate investing?" After all, you think, "won't the investor see a problem that their investment project with me can't take full priority over my job or other company?"
These are good and valid questions. You are on the right track when you think along these lines because you are putting yourself in the private investor's shoes. It would be cause for worry if you didn't think this way a little bit. But, fear not..
Part time real estate investors can get private money just as easily as full-time real estate investors. As long as you set up the deal the right way, there's nothing stopping you from giving the private investor and their investment with you all the attention they need to
feel comfortable. When everything harmonizes the right way (deal matches investor which matches timing) the investor should be writing the check without issue.
If you and the investor look at managing the investment rationally, you'd come to the following conclusions:
* Even if you were a full time real estate investor, your time allocation would be different; therefore, you can demonstrate how the attention to their investment would be the same either way. This is not a bad thing at all. Remember, you should be showing the investor that you are growing your business. Growing your business requires time commitment to bringing in new private capital and finding new projects. Show them how you will take care of their money - being highly selective on which projects you buy, maintaining discipline in your operations.
* Compare and contrast how you will take care of their money compared to a mutual fund manager or other investment advisor. Most investment advisors (the good ones) have many different clients they work with. Unless the private investor is ultra-high net worth (so rich that they have their own personal full time financial advisor) then chances are their account is just one of many to the financial advisor and investment company. In fact, for most alternative investments, your private investor is going to be treated like a number. By demonstrating how much attention and care their investment with you will get, you can put their mind completely at ease...
* Many "part-time" real estate investors dedicate at least as much or more time to their investing business than their regular jobs. If you spend 30 or more hours per week on your investing business, then you are pretty close to full time status. Just because you don't derive your entire income from real estate investing yet, doesn't mean that you aren't 100% dedicated to building wealth for your investors and yourself.
Use the above techniques to overcome any objections, either stated by the investor or as they arise in your thought process. I've found that many times the biggest obstacles in the way of getting private money are the ones that real estate investors put in their own way.
If your putting mental blocks in front of you, such as thinking you can't get private money because you're not a full time investor, you are only impeding your own progress. When you follow the right steps and provide the right investment opportunity, the investor will feel like they are missing out for not investing the funds with you.
It's very common for real estate investors to start out on a part-time basis. It usually goes something like this:
You're working a full time job or running another business and you recognize the great wealth building opportunity that real estate investing brings. You begin looking at properties, making offers and a getting feel for how the business works. You soon recognize that financing your investment properties is a big part of the equation. Mortgages and hard money are very difficult to come by (and the terms are unfavorable). You realize private money is the best option for buying and selling, as well other entry/exit strategies (1031, etc.).
A problem arises in your mind, though: "will it be a negative factor for a private investor to place funds with me since I do not yet dedicate all of my time to real estate investing?" After all, you think, "won't the investor see a problem that their investment project with me can't take full priority over my job or other company?"
These are good and valid questions. You are on the right track when you think along these lines because you are putting yourself in the private investor's shoes. It would be cause for worry if you didn't think this way a little bit. But, fear not..
Part time real estate investors can get private money just as easily as full-time real estate investors. As long as you set up the deal the right way, there's nothing stopping you from giving the private investor and their investment with you all the attention they need to
feel comfortable. When everything harmonizes the right way (deal matches investor which matches timing) the investor should be writing the check without issue.
If you and the investor look at managing the investment rationally, you'd come to the following conclusions:
* Even if you were a full time real estate investor, your time allocation would be different; therefore, you can demonstrate how the attention to their investment would be the same either way. This is not a bad thing at all. Remember, you should be showing the investor that you are growing your business. Growing your business requires time commitment to bringing in new private capital and finding new projects. Show them how you will take care of their money - being highly selective on which projects you buy, maintaining discipline in your operations.
* Compare and contrast how you will take care of their money compared to a mutual fund manager or other investment advisor. Most investment advisors (the good ones) have many different clients they work with. Unless the private investor is ultra-high net worth (so rich that they have their own personal full time financial advisor) then chances are their account is just one of many to the financial advisor and investment company. In fact, for most alternative investments, your private investor is going to be treated like a number. By demonstrating how much attention and care their investment with you will get, you can put their mind completely at ease...
* Many "part-time" real estate investors dedicate at least as much or more time to their investing business than their regular jobs. If you spend 30 or more hours per week on your investing business, then you are pretty close to full time status. Just because you don't derive your entire income from real estate investing yet, doesn't mean that you aren't 100% dedicated to building wealth for your investors and yourself.
Use the above techniques to overcome any objections, either stated by the investor or as they arise in your thought process. I've found that many times the biggest obstacles in the way of getting private money are the ones that real estate investors put in their own way.
If your putting mental blocks in front of you, such as thinking you can't get private money because you're not a full time investor, you are only impeding your own progress. When you follow the right steps and provide the right investment opportunity, the investor will feel like they are missing out for not investing the funds with you.
Comments (1)
I worked as an electrical engineer up until becoming a full-time investor recently. I always found that it gave people confidence that I had a source of income outside of my real estate endeavors to pay them back if the crap hit the fan. I guess it is all in the pitch to the investor!
Bryan Hancock, about 14 years ago