Knowledge and Power Positioning for Private Money

It wasn't that long ago (at least it seems like it wasn't that long ago) when I started hitting the private money trail. At the time, I thought that anybody would be crazy to not sit down and consider investing in a private money deal. Then, I realized that I was crazy.

Why?

Because I was assuming that people knew what I knew. I was assuming, that the average investor that I was talking to had been to all the real estate seminars that I had, read all the books and been "up to speed" with what was possible in the marketplace.

Wrong. Wrong. Wrong.

This wrong-headed thinking cost me a lot of dough. It cost me a lot of blown appointments.

It's just plain dumb to expect your private investors to know what you know. Often, they don't even know much about investing - they have a financial planner or CPA or somebody that guides them. Therefore, it's your job to first educate them. I advise providing educational materials before you even sit down with somebody the first time. This will save you a lot of frustration.

5 (Critically) Important Things...

Last week, I spoke at a real estate investor association in Macomb County, Michigan. I was teaching real estate investors 5 of the most important details with getting and using OPM (other people's money) to fund their deals. One of these top 5 was: marketing for private money. Actually, to be more specific, correctly marketing for private money.

You see, you just won't be able to get private investors if none of them know about your opportunity.

And...there's another VERY important - and often forgotten - aspect of correctly marketing for private money and that is...positioning.

I'll tell you, there's a lot of bad "poison info" out there from people who will tell you (from the front of a room no less) that you can simply get a list of people who stuff money under their mattresses who will place money with  you.

Without getting into too much detail, I will tell you from blood and guts, in-the-trenches, getting-my-teeth-kicked-in, experience that people who love to stuff their nest-egg into CD's, savings bonds and under their mattress ARE NOT your ideal target investor.

You have to go after those prospective investors that have ample funds already invested in: stocks, mutual funds, bonds, commodities, REIT's. And, you have to go after people that make good money. The $50,000 per year household makes different decisions than the $150,000 per year household. Just a fact of life. Don't completely ignore the $50,000 household, but don't focus a lot of time on it, either.

Because it's ideal to target investors with means and funds currently invested, you then need to position your investment as a benefit-filled alternative to some of what they are currently invested in.

Positioning is all-important in marketing.

And, in positioning your private money investment, you must take care to establish two things:

1. You - as an expert and credible source of information

2. Your investment - as the proper allocation for part of somebody's portfolio.

For now, I will leave #1 (above) for a later post and focus on #2. Mostly because I think #2 is a bigger challenge for more real estate investors looking to raise private funds.

You should make a concerted effort to position your investment as  a good "allocation" of your prospective investor's currently invested assets.

Since there are so many ways you can do this (at least a dozen that I have successfully implemented for myself and my students), I want to just focus on one very basic way for today. This simply involves creating a table comparing and contrasting stocks, mutual funds and other investments with your private money investment deal.  Here's an example:

Benefit     Private Real Estate Placement      Stocks         Bonds             Mutual Funds

Principal coverage          Yes                      No              Sometimes          No

Peace of mind               Yes                      No                    No                No

Ease of investing           Yes                  Sometimes           No                 X

Tradeable               Sometimes               Yes                   Yes               Yes

Price fluctuation            No                     Volatile             Volatile             Volatile

Fees & Commissions      No                      Yes                 Yes                  Yes

Etc....

Yes, this is a very basic and simplified example, but if you aren't using a tool like this, you are really selling yourself short.

Because private investors "don't know what they don't know" - and because one of the most important roles you have in bringing in private money (via marketing) is to educate - you must take care to present easy-to-understand information that is digested quickly and taken to heart.

Present this information to your investors before you meet them. Design your marketing pieces to position your investment as simply a new option on the menu. You don't want your investors thinking that they're eating at a new an exotic restaurant. You want them thinking (correctly) that their menu of choices has simply been updated. They now know they can "choose" to invest with you.

Make your private investors choice an easy one.

-Happy Investing