Today’s market remains being about finding private money to finance your real estate deals. Finding the money isn’t that difficult to accomplish. However, closing the deal with your money partner won’t happen unless you go about it the right way.
Presenting an opportunity to a money partner is about selling two things. First, is selling yourself and second is selling the specific opportunity you want funded.
However, before you even do that, the place to begin is learning as much about your prospective money partner as possible. A very important piece of information you want to know is if the investor has a background in real estate. There are a substantial number of people that have traditionally invested in Wall Street that have become discouraged with the poor returns and losses they have experienced. These people are looking for better investment opportunities but have a limited knowledge about investing in real estate.
Educate Your New Money Partner
You need to educate him or her but also avoid doing a data dump that leaves them confused. People that are confused don’t invest. They keep looking for an investment they understand.
The big advantage you offer investors is the high level of security that comes with real estate investing. Their money is secured by the real estate itself. Make sure they understand how this will work. The best position you can put them in is with a first lien on a property that they have more equity in than money. Say a loan that is only 70% of the property value. If they don’t understand real estate, make sure they understand this concept that makes the deal highly attractive to investors.
Next, you move to selling yourself. This is about establishing credibility. Some of this is obvious. If you’re having a face-to-face meeting, you need to dress professionally. You need to be punctual. It also helps to be articulate. Also, if the meeting has a time limit, make sure your presentation is easily completed on time. Better yet, if you end five or ten minutes early, busy people love getting a few extra minutes back in their workday – it also shows you stay on schedule. Another way to quickly build credibility is offering references they are welcome to call. The best are previous investors you’ve helped make a decent profit in past.
Always make professional presentations. Whether you are making a PowerPoint presentation over the internet or an in-person presentation, it must be polished. If you have successfully completed past deals, nothing builds confidence more than showing those results and being able to use previous investors as a reference.
Specifically Tell Them How the Money Will Be Used
In your presentation, you want to be as specific as possible about how the investor’s money is going to be used. You’ll get nowhere (and no money) if you just talking about how you want $100,000 to start investing in real estate and that you’ll know a good deal when you see it. That’s all wrong.
Your best position is when you talk about a specific piece of property you want to invest in. Then you can get into the numbers. You can talk about a specific white picket fence house in a nice neighborhood you will buy for 70% of market value to invest $10,000 in cosmetic improvements and sell within two months for full market value.
If you can’t be that specific, be as specific as you can. At least stick with one strategy, whether it’s investing to rent out or flipping houses. Always have an exit strategy. How is the investor getting his or her money and profit back out? What are your investment criteria? Is your strategy only properties that can be flipped for at least a 20% profit within three months? What are the typical expenses you expect to pay?
Finally, be crystal clear how the investor will make money on the deal. Are you offering to pay 12% interest or offering a percentage of the profits? When will they be paid? After the resale or a monthly income stream from a rental?
Keep everything positive. You’re not begging for their money. You’re offering them a highly secured investment opportunity with higher returns than they will find anywhere else for the same low risk.
Follow these steps and you’ll soon have more financing than you ever thought possible.
Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.