Tough Question from a Private Investor? That's a Good Thing

If you're ever faced with a tough question from a private investor - or even imagine one occurring in your mind - don't worry. It's a good thing.

Tough questions from private money investors could be:

• "How do I know this will work?"
• "What if you can't sell the property?"
• "What if the property burns down?"

There are many other questions and potential objections the investor could have to placing funds into your real estate investment deal. I will save the ink for now.

So, why is this a good thing?

Sales 101.

Sales 101 gets down to the very basics of facilitating a transaction. And, one of the basics in getting the investor to write the check is to answer or pull out of them every possible reason why they won't invest money into your deal(s). If you try to get the money without having answered their fundamental questions and objections, you're success rate will be sub-par (at best). Don't short circuit the process.

The first step to doing this is to preempt objections by answering them in your marketing pieces and your presentation. Major points should be covered and if the investor continues to step forward then they've effectively gone through a good qualifying mechanism. Once they've gone through the qualifying mechanism (hit your website, received your email,filled out a questionnaire, called you once or twice) the fundamental questions have been answered, the prospect is interested and ready to move ahead.

If you don't hear any questions or objections along the way, assume that the prospect is not interested. Something didn't hit home with them.

It can be challenging sometimes when sitting in front of an investor or group of people who have the potential to place hundreds of thousands or millions of dollars into your business and be faced with tough questions. But the same rationale holds. If they are asking questions, it means they are interested and have not dismissed your proposal in their mind.

Think about it this way: the last time you made a bigger ticket purchase (maybe a TV or a car) did you ask lots of questions? I'll bet you did. You wanted to get all of your facts right before parting with thousands of dollars. Can you imagine yourself just walking into a Best Buy and slapping your credit card down on the counter and saying "gimme one of those!"? Probably not. You asked questions about your pending purchase and when you received satisfactory answers to those questions you moved up one rung on the buyer scale. The same holds true for private money investors.

The more questions you get, the more interested the prospect is. I'm assuming, of course, that the investor has signaled themselves as not being a 'tire kicker'. Tire kickers will ask all kinds of questions with no intention (or ability, probably) to place any amount of money with you. If you're marketing your opportunity correctly, people should quickly flock to you that are ready, willing and able to place funds.

The tougher the question you get from the investor, the more interested they are. By asking you contingency questions, such as "what happens if the house burns down," they are projecting the investment with you in the theater of their mind. Once the movie plays for them and it results in a happy ending, even in spite of some perceived adversity, the money is sure to follow.

Learn to take questions head-on. The less you beat around the bush, the less reasons the investor has to mistrust you. Trust is building block one in your pipeline of private money - so construct carefully.