Use Specifics to Win Over Private Investors

Warning: this is a very important topic - so pay close attention. Implementing what I have to say here could mean the difference in hundreds of thousands in private money for you. Don't believe me? Nonsense?

 

No.

 

100% real. Time tested. Battle tested.

 

You see...

 

Every time you communicate in any way with a private investor, you must always be working toward closing the deal. You want to get the max bang for your buck. You never a second chance to make a first impression. And there's always a fine line to walk when talking to potential private investors: between giving them the broad 30,000 ft. view or going through minute specifics, such as the deal structure and closing mechanics....

 

A lot of real estate investors will err on the side of staying 'high level' in their discussions. Not wanting to bog down the private investor with too much detail and scare them away. After all, nobody likes to see the other person's eyes glass over and roll back in their head due to boredom.

 

On many occasions I have found myself walking that fine line, trying to get a good read on what points would most relevant to the investor while still getting them the information they need to make a decision. It's not easy and it's something that you're going to have to get a feel for once your in the conversation or putting your marketing piece together.

 

However, I do have a very helpful tip for you that may save you a lot of time and get you more private money. Here it is:

 

Use specifics when describing the 30,000 ft view.

 

Let me put this in another way:

 

If you don't communicate the specifics of what you do and what you offer (in the right way) you will risk losing the investor from the beginning.

 

What I mean is this: as you explain your business to the investor (which you should always do no matter what - never assume anything) is that you provide specific

 

Specifics = credibility.

 

And credibility is probably the single most important aspect of winning the private money game.

 

Let's say your business is buying and selling single family houses. You could describe your business as follows:

 

"We buy, renovate and sell single family houses. We acquire bargain deals and quickly rehab them and sell for profit."

 

[side note: I see real estate investors using this as their company tag line all the time....do yourself a favor and don't use the same one every investor is using. try to put your USP - unique selling proposition - in your 'tagline']

 

A better way to describe your business is to use specifics like this.

 

"We buy 3 -4 bedroom homes in family neighborhoods. Lots of nice ranches and bungalow styles. Mostly 1,500 to 2,00 sq. feet. We look for neighborhoods where we see lots of kids playing and well manicured yards. The kind of place you could see yourself waking up in the morning and waving to your neighbor without feeling the least bit awkward. Little gems - diamonds that need to be polished with a thorough renovation to be ready for a nice family to move in and make it their home."

 

Do you see the difference?

 

I'm sure you do. It's not a subtle difference at all.

 

What I'm trying to say is that you must paint a word picture for your private investors - and specifics are a part of that.

 

There have been extensive advertising studies done where the results of one advertisement are compared with the other for the same product (called an A/B test) and it is routinely found that the more descriptive advertising copy is what sells the best - often by an overwhelming ratio. 4/1 or 5/1 is not uncommon. Applying this to raising private money, you must consciously build additional credibility for yourself and your business. And using "specificity" to do this will add a huge boost to your bottom line result. Here's why:

 

The most specific you are, the more the dots are connected for the investors. As I mentioned earlier, you can't assume your investors know anything about real estate investors or private money. And, you especially can't assume that they know the in's and out's of your particular business model...

 

So, the more you spell out in details (not mind-numbing details, but interesting and relevant details that paint a word picture) what it is you do and what it is you want, the more successful you will be. If you're borrowing private money in the form of secured mortgages, paint the picture like this:

 

"...private investors have the comfort of full security in their investment - their principal is protected by a time tested legal document used for centuries by wealthy banks and lenders to reduce their risk and ensure repayment- a mortgage...." and you can go on to explain a little bit more about how the mortgage would work, etc.

 

Don't short-change your description. You'll just end up short-changing your results.

 

-Happy Investing