Einstein on Getting Private Money

Did you know that Albert Einstein was a real estate investor?

In addition to be one of the most famous and influential physicists of the 20th century, Einstein bought and sold real estate like nobody's business. Ok...just kidding. Even though Einstein wasn't a real estate investor, many of his quotes and teachings can be applied to achieving wealth through real estate. One Einstein  quote, in particular, really sums up the core message I try to communicate as I teach investors techniques and strategies to raise money from private investors to fund their investment deals:

"You can't solve a problem with the same mindset in which it was created." When it comes to getting private money for your deals, this quote is priceless. This makes a ton of sense. If you want to have private investors fund your deals (a very good idea) you won't get them with the same mindset in which you haven't gotten any. You must change your thinking.

If you're used to the mortgage game, where you just fill out an application and wait to see if your number comes up, then change in mindset is vital. If you're used to vying for hard money loans, private money requires you to approach investors from a different mindset. Points, fees, terms - everything is different (and better) with private investors. Thinking about getting private money with the same mindset in which you view other financing sources will lead to frustration. You see, private investors think differently than professional lending companies do. The internal decision making process is not one of paperwork and underwriting and committee approvals. There is no formal application. It's not a competition for who has the best deal. No. With private investors it's all about providing an intelligent allocation of a person's funds that they feel good about.  

Two sides of the coin are in play: logic and emotion. People buy/invest based on emotion, and justify their decision with logic. If you approach investors as if they were financial robots who only care about LTV, interest rate and collateral value, then you are approaching getting investors in the same mindset which you don't have them.

If you approach investors as if they have no other decisions as to where to place their funds, you are trying to solve a problem (none or less than enough deal funding) with the same mindset which you don't have them. So, you can see why I like the Einstein quote so much.

When I first started out raising private money, I thought that fancy financial projections and secured returns were all they cared about.

I was wrong.

Dead wrong.

Different investors respond to different aspects of investment. When you change your mind set by putting yourself in the private investors shoes, you'll be well on your way to solving your private money 'problem' with a different mindset in which it was created.