"Here's a Good Starting Point to Get Private Investors”

 

What's the first thing to do when you decide private money will cure what ails ya?

 

Before you answer, here are a few popular choices:

 

    * Run around like a crazy person and tell people that you've just discovered the second best thing to the lost city of gold

    * Slap a business plan together and crunch numbers on a spreadsheet until you're blue in the face

    * Start posting ads on real estate message boards or online classifieds about your deal of the century

 

If I were you - I would not choose any of the above. Even though having a business plan is important to A: running and successful business and B: getting funding, I still wouldn't rank it as numero uno on my to do list if I had to start all over again at zero with no private money.

 

Knowing what I know now about getting private lenders and equity investors to fund my real estate deals, the first and most important thing I would do is....

 

Establish a Unique Selling Proposition (USP).

 

I think a USP is perhaps the single most important thing you can do for any business when it comes to marketing. And, make no mistake, raising private money is all about marketing. Why? Because if people don't know about and do not see the benefits of investing with you in a way that matters to them they will not invest. Period.

 

Ok, so what exactly is a USP?

 

Great question.

 

A USP is  a way of presenting your product or service which completely differentiates you from any and all competition while at the same time promising a huge benefit to the customer that moves them to action.

 

Here are some examples:

 

"Hot, Fresh Pizza to Your Door in 30 Minutes or Less - or It's Free." (Dominos Pizza)

 

"When it absolutely, positively has to be there overnight." (Federal Express)

 

"Melts in Your Mouth, Not in Your Hand." (M & M's)

 

Now, before you think that I've totally lost my mind - I mean, you're thinking 'how does this relate to real estate investing?' - just consider this:

 

There are thousands of companies that are competing from your private investors funds. Banks, Mutual Fund Companies, Insurance Companies..you name it. If you think that the first thing your private investor thinks about in the morning is how and where can he find a private mortgage investment - you are dead wrong.

 

Every time your prospective investor picks up a newspaper, there's an advertisement for Fidelity Investments, T Rowe Price, ING, and the list goes on and on.

 

If you cannot crate a unique and compelling reason (beyond: "earn 10% on your money secured by real estate") then you will have a much longer and tougher road to raising private funds.

 

That's my rationale for establishing a USP as the first thing that I would do if I had to start all over again at 0 private money.

 

How can you get started doing this? Actually, it's a heck of a lot easier then you think.

 

First, start with the benefits of investing with you. I wrote about how to find the benefit versus the feature of your private money investment in a recent post, so I will let you read more about it there. Suffice to say, your USP must contain a great benefit for your investor that also makes you different from the competition.

 

I will try to construct one right here for an example. Keep in mind that this won't be  a perfect one but it should get you started in the right direction. Ok...let me see..

 

Let's start with some benefits:

 

    * no fees or commissions (unlike mutual funds or stockbrokers)

    * build wealth faster

    * inflation hedge

    * principal protection

    * peace of mind

 

This isn't an exhaustive list, but it gets us going in the right direction. Now, how can we translate some of those so our offering is something unique and extremely beneficial to the potential investor? (keep in mind, that even if your product or service isn't 100% unique on it's own, you can present it and offer it in a completely unique way)

 

How about....

 

"Double your money every 6 years without losing a wink of sleep."

 

Not bad. I don't hate this one. I'm not sure I'm in love with it yet. It's a little wordy..but it could easily get the job done.

 

Want to know how I broke this down?

 

First of all, "double your money in 6 years" is ONE HUNDRED MILLION times better then saying "12% interest". One is  a feature and one is a benefit. Next, saying "without losing a wink of sleep" is better then saying "peace of mind", "no hassle" and "preservation of principal."

 

I'm pretty sure that if you used this message that it would land just fine.

 

When it comes to USPs, all you have to do is a little role playing. Have somebody ask you: "why should I do business with you?" Your answer should then be your USP. Think about it. Let's go back to the famous examples we looked at before.

 

Federal Express Example

 

Q: "Why should I use Federal Express?"

 

A: "Because your package absolutely, positively has to be there overnight."

 

M&M's Example

 

Q: "Why should I eat M&M's?"

 

A: "Because M&M's will only melt in your mouth, not your hand."

 

Here's an example as it applies to private money:

 

Q: "Why should I do business with you?"

 

A: "Because with me you can double your money in 6 years without losing a wink of sleep."

 

 

I hope you now see the importance of developing a USP. It will give you the foundation to completely dominate the competition in raising private money. All the other real estate investor using the same old "earn 10% on your money..." bit will be blown away by you.

 

More importantly, you will be able to quickly and easily convey a benefit to your prospective investor that will create a burning desire inside of them to place funds with you and tell everyone they know to do the same thing.

 

-Happy Investing!