What follows is how I've signed every credit partner that I've sat down with, to terms that very few would believe: they receive 2% of whatever I borrow, no split of profits; and they're happy.
If you read my bio you know that I am not in a "hot market," but we love where we live and I see opportunity everywhere I look. So we are starting in REI and it's going pretty good so far, closing in on several deals at once and have one success to report: I have 3 partners that are letting me use their good credit history to invest with. We will JV on deals until we decide not to anymore. They only want 2% of what we borrow paid to them.
Credit partners are not the preferred method, I know; but I'm starting with not much more than hustle. I'd much rather the ease of a HML but don't have the experience they want. I'd really love an IRA network to borrow out of, but am still working on that. And of course, I wish I have my own savings to invest along with great credit, but we are a young family. So I used the one thing I can offer: salesmanship.
Sales is a craft to me. The ability to communicate effectively, to anticipate needs and wants, and deliver people to a decision is something I've studied and practiced all my life in varying capacities. I'll share what sales principles I used and how they applied to getting credit partners.
"Know your customer" - I am not looking for sophisticated investors, I am looking for credit to use. So, I didn't look on BP or in REI clubs, I put ads on Craigslist job boards. The folks looking there are looking for income and not investments. I offer "$5,000 for your good credit" and when we sit down I emphasize the new stream of income, 2% of every dollar I borrow on their credit, and how our agreement promises that I will repay all debts. I also share that I will only buy property that is presently under-valued. I'm conservative and they are safe.
"Show me the baby, don't tell me about the delivery" - That's a little crass, but is how the principle was taught to me. Rather than asking the credit partner to join me first, then we go hunt for a deal, I came ready with several potential deals. These were right off of the MLS, but they were easy to understand and showed that this is a real opportunity that they could profit from.
Question Based Selling - It's a great book, and coupled with High Probability Selling, I have learned that a string of questions is the best way to make someone be comfortable and take action. It's the Socratic method applied to salesmanship. "What did you like about the ad you responded to?","How much money are you looking to make this way?","Do you think you are a qualified credit partner?","What more do you need to know, before signing our agreement?" Maybe the best kept secret in selling. It is a developed skill, but also something you can prepare on a notepad easily.
"Maybe' is worse than a 'No" - From our first email I was preparing them to make a decision. "If this meeting goes right we won't need the NDA I sent you." I had their 2% written in hard numbers right on the deal sheets. The meeting was short and pointed. Our agreement was written like sales-copy, reiterating what I'd just told them, and delivering them to a 'yes'. They either had to say Yes or walk away; there was no middle ground. "Maybe" wastes your time and gives false hope, at lease a "no" frees you to look to the next opportunity.
I hope that these principles make your future partnerships easier, your selling stronger, and inspire you if you have nothing to start with. Now we have the borrowing potential of 3 great people. I look forward to posting many more success stories on here as we grow our business.
If you feel like I'm taking advantage, I'd like to remind that each partner is happy, and that this is just a start. After our first deal I plan to structure an entity and bring in formal partners. In the mean time these folks will make a few thousand dollars on an asset (their credit) that they weren't using, and they didn't know how to monetize. I expect that I'll upgrade the better credit partners to business partners in our future entity as we build credit there.
