Raising Capital Is A Contact Sport
As a real estate investor, you need to have capital to do deals - that is, if you want to be a successful real estate investor. Sure, you can do wholesale deals where your profit margins are smaller, but in order to really succeed and make significant profits on each deal, you need to have access to working capital. I am going to show you how to raise your first $1 Million of private capital so you can buy and sell real estate deals. Once you get really good at this, being successful as a real estate investor becomes almost elementary. When I started out, I did not make raising private money a priority - I did not see a need for private capital. Fast forward to today and, for anyone who has bought and sold houses, you know you need capital to do deals. The days of doing short sales with back-to-back transactions are pretty much over. You are now required to buy and hold a property for 30-60-90 days, and flipping REOs is a tough game. But we are finding we can buy, fix and flip properties and consistently make at least $40,000 on a transaction. When we buy, fix and sell, depending on how extensive a renovation is, the process can take anywhere from 4-8 months. A perfect storm is brewing right now which is allowing us to be extremely successful and dominate our competition and raise lots of capital.
The Perfect Storm
The real estate market has gone south since 2007. But, there are several factors in pace today that are working to our advantage:
1. We can buy properties today at very inexpensive prices, especially through REOs.
2. Even though banks are not the free-wheeling lenders they used to be (2002-2007), FHA is the new sub-prime, in my opinion. There are some FHA lenders who are lending money to people with a 580 credit score. I have been brainstorming funding programs for my buyers with private lenders I know. There are buyers who are able to get financing because of this.
3. The stock market and the precious metals market are completely flat. Stocks are actually down over the past 5 years - the S&P is down 16.59%, the Dow Jones is down 11%. Over the last 10 years, the S&P is only up 20.07%, and the Dow Jones is up only 21.94%.
As I am trying to raise money from my network, I am educating them to what has happened to their investments over the past 10 years. Today you cannot make money in bonds, annuities, stocks, precious metals. As a financial planner, I used to look at past results for my clients. That's what we had to go on. Financial advisors that you are competing against are telling their clients to diversify and wait. I explain how returns on CDs, annuities, bonds, stocks are laughably low, but as an experienced real estate investor, I can offer a fixed, double-digit return on their investment. It doesn't take long for someone to see my point.
So today, my mission (this is actually the Mission Statement for one of my companies, Millennium Capital) is "To provide our investors double-digit investment returns by matching our knowledge and acquisition of undervalued assets with investors looking for investment alternatives and double-digit returns." My one and only goal is "to significantly increase the wealth of our private investors with double-digit returns plus upside bonus potential."
People do not have any alternative of where they can put their money right now. So how do you raise a significant amount of money in the next six months?
In my business, I realized that I had to educate anyone whom I thought would be potential private lenders. There is no magic list of people for raising capital - there is no list of people who are waiting to loan you money, unless they know who you are and what you do.
I have been sending out a newsletter for the past year that is designed to educate my network, friends, family, and anyone I can think of, about who I am and what I do. You need to be proactive and educate your network about what you do. You don't need to pitch them or call them. You need to become the top of mind reference as someone who can help them raise more money.
So here is what you need to start raising capital today - most of this can be compiled into a simple PowerPoint presentation (better yet, take mine, rebrand it and reuse it - find it on the AI Membership Site):
4. Professional collateral - Educate people in a non-sales-y way through a newsletter. Educate them on something about real estate and prove that you know what you're doing (showcase deals you have closed). Show your audience a property that you have under contract, give them an opportunity to get involved in a transaction. Include industry news. Investment alternatives. This is something you can easily put together and duplicate. In addition to a newsletter, you will need some sort of professional collateral from you to help convince them to give you their money: Flyers about Company Leadership, Being the Bank, Investment Highlights, Company Overview. Potential private lenders want to know if they can trust you, that their money will be protected and they will earn a reasonable rate of return.
5. W.I.I.F.M. - What's In It For Me? This is what the potential private lender wants to know, and what you have to show them. Tell them a story, convince them what they could be doing as an alternative to the stock market. Give them the security knowing that you will provide a note and a mortgage for a fixed return. Be careful not to offer guarantees or that their money will be "safe."
6. Tell stories about properties and deals you have done - Show actual investment examples as proof of concept.
7. Tell what you will do - You do all the hard work so the private lender can relax and just wait for their profits to come in. You do everything; You just need the money.
What will it take for you to raise significant private capital in the next six months or a year?
In my business, the average amount that a private lender has to invest with me is $50-$200,000. If you present to 30 people over the next year, I would venture that you will be able to close about 10 people who have, on average, $100,000 to loan to you.
Having the professional collateral, a compelling argument against traditional investment avenues (CDs, stocks, precious metals, annuities) and proof of your success and you'll find yourself collecting private money again and again. Take the materials I have given you in the AI Membership site and educate yourself on what's going on in the S&P, Dow, CD rates, bond rates, annuity rates - a simple Google search will give you more than enough information to bring you up to speed.
Being a real estate investor is easy when you have capital. You need to have someone's money to do deals.
To learn more about working with private lenders, visit [http://www.strategicrealestatecoach.com/2012/07/12/3-most-common-questions-from-private-lenders/].
The Perfect Storm
The real estate market has gone south since 2007. But, there are several factors in pace today that are working to our advantage:
1. We can buy properties today at very inexpensive prices, especially through REOs.
2. Even though banks are not the free-wheeling lenders they used to be (2002-2007), FHA is the new sub-prime, in my opinion. There are some FHA lenders who are lending money to people with a 580 credit score. I have been brainstorming funding programs for my buyers with private lenders I know. There are buyers who are able to get financing because of this.
3. The stock market and the precious metals market are completely flat. Stocks are actually down over the past 5 years - the S&P is down 16.59%, the Dow Jones is down 11%. Over the last 10 years, the S&P is only up 20.07%, and the Dow Jones is up only 21.94%.
As I am trying to raise money from my network, I am educating them to what has happened to their investments over the past 10 years. Today you cannot make money in bonds, annuities, stocks, precious metals. As a financial planner, I used to look at past results for my clients. That's what we had to go on. Financial advisors that you are competing against are telling their clients to diversify and wait. I explain how returns on CDs, annuities, bonds, stocks are laughably low, but as an experienced real estate investor, I can offer a fixed, double-digit return on their investment. It doesn't take long for someone to see my point.
So today, my mission (this is actually the Mission Statement for one of my companies, Millennium Capital) is "To provide our investors double-digit investment returns by matching our knowledge and acquisition of undervalued assets with investors looking for investment alternatives and double-digit returns." My one and only goal is "to significantly increase the wealth of our private investors with double-digit returns plus upside bonus potential."
People do not have any alternative of where they can put their money right now. So how do you raise a significant amount of money in the next six months?
In my business, I realized that I had to educate anyone whom I thought would be potential private lenders. There is no magic list of people for raising capital - there is no list of people who are waiting to loan you money, unless they know who you are and what you do.
I have been sending out a newsletter for the past year that is designed to educate my network, friends, family, and anyone I can think of, about who I am and what I do. You need to be proactive and educate your network about what you do. You don't need to pitch them or call them. You need to become the top of mind reference as someone who can help them raise more money.
So here is what you need to start raising capital today - most of this can be compiled into a simple PowerPoint presentation (better yet, take mine, rebrand it and reuse it - find it on the AI Membership Site):
4. Professional collateral - Educate people in a non-sales-y way through a newsletter. Educate them on something about real estate and prove that you know what you're doing (showcase deals you have closed). Show your audience a property that you have under contract, give them an opportunity to get involved in a transaction. Include industry news. Investment alternatives. This is something you can easily put together and duplicate. In addition to a newsletter, you will need some sort of professional collateral from you to help convince them to give you their money: Flyers about Company Leadership, Being the Bank, Investment Highlights, Company Overview. Potential private lenders want to know if they can trust you, that their money will be protected and they will earn a reasonable rate of return.
5. W.I.I.F.M. - What's In It For Me? This is what the potential private lender wants to know, and what you have to show them. Tell them a story, convince them what they could be doing as an alternative to the stock market. Give them the security knowing that you will provide a note and a mortgage for a fixed return. Be careful not to offer guarantees or that their money will be "safe."
6. Tell stories about properties and deals you have done - Show actual investment examples as proof of concept.
7. Tell what you will do - You do all the hard work so the private lender can relax and just wait for their profits to come in. You do everything; You just need the money.
What will it take for you to raise significant private capital in the next six months or a year?
In my business, the average amount that a private lender has to invest with me is $50-$200,000. If you present to 30 people over the next year, I would venture that you will be able to close about 10 people who have, on average, $100,000 to loan to you.
Having the professional collateral, a compelling argument against traditional investment avenues (CDs, stocks, precious metals, annuities) and proof of your success and you'll find yourself collecting private money again and again. Take the materials I have given you in the AI Membership site and educate yourself on what's going on in the S&P, Dow, CD rates, bond rates, annuity rates - a simple Google search will give you more than enough information to bring you up to speed.
Being a real estate investor is easy when you have capital. You need to have someone's money to do deals.
To learn more about working with private lenders, visit [http://www.strategicrealestatecoach.com/2012/07/12/3-most-common-questions-from-private-lenders/].
Source...