Sooner or later, we all run out of our own money to invest in real estate deals. It’s certainly happened to me. I’m out there looking at different investment opportunities and find a gem. The only problem is, I’m tapped out.
This is why having the ability to raise private money for real estate investments is one of the most important skills you can develop as a real estate investor. But the problem is, talking to people about money can be awkward and uncomfortable, nevermind asking people to invest in a deal with you.
In this video, we’ll cover the basics that you need to know to get over that hump, to get out there and start talking to people, and to provide valuable investment opportunities to the people who matter most to you.
If you’ve ever invested in real estate with a group of people, either through a joint venture partnership or through a real estate syndication, you know the power of OPM, or other people’s money, in getting a real estate deal done.
Today, we’ll go over what it means to raise private money for real estate investing and whether it’s right for you.
By the end of this video, you’ll have a better understanding of whether raising private money for real estate investing is a good fit for you and, if so, how to get started.
Okay, let’s dive in. First, let’s start with whether raising money is right for you. Just like some people are more into the acquisitions and underwriting side of real estate investing, some people are a better fit for raising capital.
Capital raising, at its core, is all about talking to people. When you raise money from private investors, your sole focus is on educating them about the potential opportunity at hand, making sure all their questions are answered, ensuring that they know the risks going in, and that they are confident investing their money with you. So, you have to really love people.
When you raise capital, you should plan on spending a lot of time thinking about, meeting with, and serving other people. You’ll likely be writing lots of emails, answering lots of phone calls, scheduling coffee dates, attending meetups, creating a thought leadership platform, and leveraging social media and marketing where appropriate.
You don’t have to have a huge rolodex to get started, but it doesn’t hurt. If you don’t know as many potential investors to start, you’ll need to plan to get out there and really hustle, especially because you cannot publicly advertise most real estate syndication opportunities, due to SEC regulations.
Okay, if you’re still with me and you’re thinking that, hey, I know some people, and I love talking about real estate investing, then let’s move on to the how.
How do you actually go about raising your first dollar of private money?
I’m sure it won’t surprise you, but the best first step is to start with friends and family. People will only invest with you if they know, like, and trust you, so friends and family are the best place to start, because they already have an established relationship with you.
Okay, next, when do you start raising money? The answer…are you ready…is BEFORE you have a deal. I’m going to say that again.
You should start raising capital BEFORE you have a deal on the table.
Why? Because the last thing you want is to rush people into investing with you. That creates a sense of desperation, and investors can smell desperation a mile away. Instead, start having those conversations BEFORE you have a deal under contract.
And what do you say? Great question. This is where most people get stuck. Talking about money can be awkward and uncomfortable, especially if you’re not used to it, and most people hate sounding sales-y, especially in front of friends and family.
The first step in getting over the hump is mindset. A lot of people are intimidated by raising money because they feel like they’re selling a product. And yes, technically, you are selling an opportunity. But therein lies the difference. It’s an OPPORTUNITY. You are giving your friends and family and potential investors an opportunity that they would not otherwise have access to.
So that’s the first step, is getting in the right mindset.
The second step is to create a sample deal package. This applies whether you’re raising money for a flip or for a real estate syndication. Potential investors are going to have lots of questions about the potential returns, the type of asset, what exactly you’re going to do with their money, when you’re going to give them their money back, and more.
This is the value of having a sample deal package. A sample deal package is simply a presentation, usually a powerpoint deck, that includes photos, information, financials, and data about a sample deal.
When you talk to potential investors, you can tell them, “I don’t have a deal right now, but when I do, it’s going to look a lot like this.” Then, you walk through the sample deal with them and answer their questions.
If they’re not interested, don’t push. Thank them for their time, and ask them if they know someone who might be interested.
Keep in mind that it’s going to be slow going at first. It’s going to take a lot of time, a lot of meetings, a lot of hustle. And that’s why you really have to love it. Once you start building up a database of happy investors, they’ll invest with you in multiple deals, and they’ll refer you to their friends as well, so it WILL get easier.
Okay, there you have it. To raise private money for real estate investing, you have to first get in the right mindset, start by talking to friends and family, begin the conversations before you have an active deal, and create a sample deal package.
If you’re interested in seeing some of the things we talk to our investors about, I highly recommend you sign up for our free Passive Real Estate Investing 101 course. This course will walk you through the various topics that we talk to our potential investors about, before they invest with us.
And finally, if you liked this video, hit the like button below, share it with your friends, and be sure to subscribe.
I’m Annie Dickerson with Goodegg Investments. Thank you for watching, and I hope you have a sunny-side-up day.