039: How to Raise Private Money

SHOW NOTES FOR EPISODE 039 WITH BOB BOWMAN  –  HOW TO RAISE PRIVATE MONEY

In this episode, real estate investor and fund raising virtuoso Bob Bowman shares how he became a real estate investor by mastering the art of private raising money.

What You Will Learn

• How he bought his first investment home for $50 and sold it for $45,000
• What are the three things investors need to see before they will give you their money?
• How it’s possible to start a new career after 50 and succeed
• Why he wants to make all his properties clean, comfortable and safe
• The number one reason why tenants leave apartment buildings
• What four things investors must see before they’ll give you any money

About Our Guest

Bob Bowman

Bob Bowman is the key principal for Bowman Investment Group, LLC.  He is a real estate investor that acquires institutional grade apartments and office buildings.  His properties are syndicated and are typically value add deals that produce good cash flow and build equity over a 5 year hold period.

What About Bob?

• Started in a corporate outside sales job – office equipment and copiers
• At age 50 he just got tired of making money for other people
• Watching late night infomercials
• 2001-2002 left his sales job
• Started buying single family homes in Central Florida
• Signed up for seminars on wholesaling, foreclosures
• Bought first flip for $50 and sold it for $45,000 in 60 days
• Spent $20,000 on education and mentorship
• Started working with his wife who has a strong financial background
• Bought many homes and then the market crashed and they had to sell
• Lost all income and his net worth – had to start all over in a difficult real estate market

Education and Reinventing His Business

• He was already over 50
• Went from residential properties to apartments
• Looked at smaller multifamily families but it looked like it would take too long
• Went to David Lindahl seminar – put $5,000 on credit card to attend
• Came home and started going to Chamber of Commerce meetings, and raised $1 million from friends and family that were Accredited Investors
• Went to another Lindahl seminar/Boot Camp
• Shared with Dave how he raised $1 million – Dave had him come up on stage to share with everyone
• Joined Dave’s coaching program

First Deal

• Within 6 months he had his first apartment purchase under contract
• Looked in central Florida but it was hard to find a property to fit his fiancial model
• Coach said to look at Dallas/Fort Worth and to fly out there
• Went to Texas and met with broker
• Found 113-unit apartment and bought it for $3.4 million. “C” asset, ugly green, 3 layers of barbed wire on chain link fences around swimming pools.  Needed work.
• Raised $1 million over the holidays (tough time to raise funds) to cover 20% down $680,000. The difference went to the acquisition fee ($70-120,000) and $200-250,000 for immediate capital improvements.
• Closed January 2009
• People immediately criticized the deal because it wasn’t local
• Sold it for $6.8 in 2015 – people stopped criticizing

Later deals

• Waited a year to “get their sea legs” to make sure the model was holding out with the Dallas property, learning how to operate an apartment, before buying elsewhere
• Then they bought apartments in North and South Carolina
• Cap rates started to compress and model didn’t work as well
• Used experience to then buy office buildings

His Philosophy

• Make all properties “clean, comfortable and safe”
  • All apartments have security cameras
  • Operate it successfully
    • #1 reason most people move out is poor maintenance
      • Set up systems to insure repairs are done quickly and well
    • Had good property manager already there when he bought the place

Notes and Tips on Raising Money

• Private money is a private placement (not like a syndication) and doesn’t have to be registered with the SEC
• Potential investors need to see the following in the person they will invest with:
  • Value
  • Trust
  • High level of integrity
  • Always does the right thing for the benefit of the investor
• Investors need to know 3 things
  • How much money do you need?
  • How much are they going to make
  • When will they get their money back
• You can’t formally discuss a deal until they have signed an accredited investor form [Note: an accredited investor is an individual who has net assets of at least $2.5 million, or a gross income for each of the last 2 financial years of at least $250,000.]
• After they signed, he would share:
  • His business model before he even had a deal and ask “Is this something you would be interested in?”
  • When he does underwriting he won’t even consider a deal unless it annualizes at 10-20% every year (total cash and equity) with a debt ratio between 1.40-1.6. It has to be well located and be a B or C –  a C in an A or B area or a B in a B or A area.  Look for value play to make improvements to boost value.  9-10% cash-on-cash return.  100 plus units.
• If you need to raise $1 million, raise $2.5 million because about half of your investors won’t participate in the deal and half of them will invest only half of what they said they would invest
• First Come First Serve – He needed to raise $2.8 million and had it in the bank in 5 days. More came in but they had to return that money
• Created a one page “credibility document” he would leave with people that outlined his background, business model
• Don’t sell – just have a conversation
  • Ask them what they do
  • When they ask you, you say “I’m a real estate investor that buys properties that are well located, have good cash flow and they create a good equity on the 3-5 year hold period.”
  • You have an opportunity that they can benefit from
• Attended Harvard seminar that showed how companies failed because the companies’ CEOs were unable to raise money

Upcoming Weekend Seminar that Bob is Teaching

• “Private Money”
• Oct 21-23, 2016 in Southern California
• For info go to crementor.com

His Current Business

• Is selling a lot of his apartments because he can get top dollar
• Buying more office buildings until apartments come back
• Looking for larger deals
• Working with family offices
• Looking for deals not properties
• Bought a B office complex in a A area in Charlotte, NC – 10.1 CAP
• Bought an A office building in A area near Dallas at 9.1 CAP

 Rap-it-Up

• Favorite real estate book: The Complete Guide to Buying and Selling Apartments by Steve Berges
• Favorite business book: Emerging Real Estate Markets by David Lindahl
• Favorite website: reis.com
• Favorite app: Rent Manager
• If you lost everything and only had $1,000, how would you start again: Raise private money.

How to Reach Bob

• bobbowman52@gmail.com
• 321-239-0647

Until our next podcast, keep moving forward and God bless!

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