Want Access to Private Money Investors? - Credibility is Key

You may find out the same thing I did when you first approach private money investors: credibility is everything.

It was a few years into my investing career when I realized that I would need private money to get to the next level.  A successful business man, a mentor of mine, told me that honesty and character is what most potential investors look for.   At the time, I thought that just a deal and a nice rate of return were all I needed to have people throwing money at me. While these were indeed critical components, reputation and credibility were equally (if not more) important.

But, what exactly is credibility in this context? Does it mean having a lot of real estate deals under your belt? Does it mean 25 years of investing experience? What does it mean to have credibility with private investors?

It's not as complicated as it may seem. First of all,

credibility begins with your reputation. If you have a good reputation (you do what you say, treat people with respect, etc.) then what you say to the investor will be taken seriously and they will consider your opportunity.

The importance of reputation cannot be overstated. Warren Buffett, one of the greatest investors (in any category) of all time has been quoted as saying (in reference to his employees):

"lose money for my firm and I will be understanding. Lose one shred of reputation for my firm and I will be ruthless."

This sums it up pretty well. If the world's greatest investor thinks reputation is important, shouldn't you?

In addition, when it comes to credibility, it is critical for you to approach investors with confidence and boldness. Think of it this way: if someone were asking you to invest funds in a real estate investment, wouldn't you feel better if someone was confident and sure of themselves?

When you stammer, 'hem and haw' or otherwise lack confidence when talking to investors, they will be less inclined to view you as a good home for their investment dollars. Psychology is very important in money movement and people like to sleep well at night. The thought of a restless night sleep will be enough to turn the investor away from you.

Another factor in building credibility with private investors is having the right paperwork to support your proposal. Do you have a business plan? Do you have the proper disclosures and offering documents? Do the details of your project make good economic sense? If you don't cover the bases in this area, you can expect less credibility in the eyes of the investor.

Don't make the mistake of thinking that private investors are simply financial robots who only care about numbers and mortgages and collateral. That might be true if you were selling large commercial mortgage backed securities in big financial markets, but if you're raising $3 million for your next real estate project, your investors are going to want to know about YOU. If you want access to private money - credibility is key.