When you start buying larger multifamily properties, your deals will take on a whole new dimension. You will likely be dealing with investors and, if you are syndicating, you’ll also have to deal with SEC regulations and attorneys. In this episode, Bill discusses how to attract investors, maintaining good communications and how to keep investors for the long term.
Raising money has always been a challenge for me and I don’t know why. Even when I was on the mission field and we depended 100% on people’s donations and support I still had difficulty. I remember one of my first encounters that really set me straight. My first mission supporter was a sweet lovely older widow who lived in a trailer. When she said I am going to commit to supporting you at $50 a month, instead of saying, “Oh, thank you very much.” I felt bad. I mean, she must have been on a fixed income and I thought, “Gee, that’s very nice of her but she needs her money more than most.” When I told her “Thank you very much but that’s alright. You don’t have to do this.” She promptly snapped back and put me I my place, “How dare you rob me of my blessing! This is for God’s work in Haiti – not for you!” Ouch! Boy, did she set me right. I never forgot that lesson. It’s God’s economy, not mine. Yikes!
Well, when I started investing in real estate, I knew that it definitely was not the same thing (even though a portion of our profits will go to support our mission in Haiti). It is still a profit-generating venture and at some point I would have to seek out “OPM” – Other People’s Money. And, although I would have preferred a way to just keep leveraging my own money – that just isn’t possible with my aggressive timeline of 1,000 units by 2020 — it is a necessity!
So, as I am now in the process of reaching out to potential investors, I realize that, in some ways, it is not that different from when I was in the mission field.
My first thought was that I would not approach friends and family for my first deal and when everything goes great, then I would share the success story and how everyone made a bunch of money. But I was reminded, recently, by a real estate investor friend who did the exact same thing. She told me how members of her family, when they found out – AFTER THE FACT – what she was doing secretly, behind their backs. Just like the widow in my story, her family members basically came to her and said, “How dare you rob us of this great investment opportunity! Did you think that WE would have liked to earn 9% cash return on our money quarter and receive a 50% bonus when the property sold?” Yikes! I get it!
So with that in mind, I want to share my approach so that perhaps you too might not be accused of robbing your potential investors of an incredible opportunity but, instead, be able to provide them with a gift that they would appreciate very very much!
You need to first, realize what you have. Real estate is one of the best investments out there today! You have a great opportunity that not only beats most other types of investments out there but that has the added value of being secured by something tangible, unlike stocks, bonds, options, etc. Your investment is backed by tangible property – land and buildings – that maintains worth and grows in value over time.
You need to change your thought process from “How am I going to find people to give me money?” to “Who deserves to share in this incredible opportunity?”
Next, have your “elevator pitch” together. Basically, a concise statement that you can tell someone what you do in the time it takes to go from floor #10 to the ground floor in an elevator ride. It’s important that you can explain the value of what you are doing and how it will benefit others.
You’ll need to know how to address people’s primary concerns, such as…
If you can answer those questions well, you will have little to no resistance in getting people to let you use their money.
Once you have done this a couple of times, the money will start coming to you. You will start attracting money by building a reputation as someone who finds good deals with good returns.
If you give back the money with a nice profit, they will give you the money again and again! It’s that simple! Then, they’ll introduce you to other people who will want you to use their money! And so it goes.
Raising money is just another stage in the road to becoming a successful real estate investor. In the same way that is was difficult to purchase that first property, didn’t it get easier after that first purchase? It is the same way with raising money. You just have to take that first step!
Well, I hope that helps.
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