Life as a real estate investor requires a special skill set. One of the most important skills you can have as an investor is the ability to raise private money for real estate deals. The problem is talking to people about money can be awkward and uncomfortable, especially when you’re asking them to invest their hard-earned money in a deal that poses risks as well as rewards.
The truth is, if you’re serious about investing in real estate (big or small), you need to get out there and start talking to people. You’ll need connections to private money lenders, other investors, and future real estate deals. The more you challenge yourself to get out of your comfort zone and provide valuable help and education about real estate investing to the people who matter most to you, the easier it will become.
Let’s face it, sooner or later, we all run out of our own money to invest in real estate deals. It is at that point that you must know how to raise private money for real estate investing.
You might immediately think about raising capital for real estate investing from friends, a family member, or a few coworkers, but you’ve got to think big-picture too. How can you reach people outside your immediate circle, talk with them about real estate investing and show them benefits so compelling that they can’t resist your next real estate investment opportunity?
In this article, you’ll discover the best ways to begin raising private money for real estate investing. In just four simple steps, you’ll be on track to start raising investment capital for real estate investing by establishing a solid reputation, spreading the word about your next real estate deal without sounding salesy, and creating a community of real estate investors who are actively interested in investment opportunities.
Is Raising Private Money For Real Estate Investments a Good Fit for You?
In the real estate industry, every investor has their own talents and special expertise. While some are more skilled at underwriting or property acquisitions, others thrive in their ability to raise private capital.
To be successful at capital raising, you have to hone your relationship-building “people skills.” Capital raising is after all, at its core, all about talking to people, creating solid connections, and building a trustworthy relationship with those who have investment capital and have an interest in getting started investing in real estate.
When you raise money from private investors, your sole focus is to educate them about the potential real estate investment opportunity, make sure all their questions are answered, ensure that they know the risks going in, and that they are confident investing their money with you.
If you choose to raise capital, be sure to plan on spending a great deal of time thinking about, meeting with, and serving other people. In this capacity, serving includes writing lots of emails, answering lots of phone calls, scheduling coffee dates, attending meetups, creating a thought leadership platform, connecting those needs to those with potential solutions, and leveraging social media and marketing when needed.
Most real estate syndication opportunities are regulated by the SEC, meaning they can’t be publicly advertised. What this means for you, as the capital-raising investor, is that you’ll need to intentionally create and leverage your relationships with potential real estate investors.
How to Start Raising Money For A Real Estate Deal
By now, you’re probably wondering how to actually find investors since that’s the key to raising your first dollar of private money. To simplify the process, here are our top four steps to skyrocket your success in raising capital for real estate projects.
#1 – Get in the Right Mindset
The first step in raising funds is to make sure you’re thinking about investment capital with the right mindset. It’s going to be slow going at first, and that can be frustrating. It’s going to take a lot of time, a lot of meetings, and a lot of peer-to-peer conversations about the benefits of real estate investing.
If you share a potential real estate investment opportunity with someone and they aren’t interested, don’t push. Simply thank them for their time, and ask them if they know someone who might be interested.
When you create a strong relationship in which both parties involved respect each other’s boundaries and are interested in finding ways they can help one another, your connection will be happy to refer you to their friends, family, or others who may become an investor in your next real estate deal.
Soon enough, you’ll have a proven track record of being helpful to people, plus a database of satisfied private money partners, who will invest with you in multiple real estate investment deals and will refer you to their family and friends. During the sometimes painfully slow process, just remember, finding real estate business partners does get easier the longer you’re in the real estate industry.
#2 – Talk to Friends and Family
As you can probably assume, the best place to start is by talking to people who already like, know, and trust you. Because they already have an established relationship with you, friends and family are the best place to start raising capital for real estate investing.
While talking to your friends and family about a potential real estate investment might sound easy enough, it can actually be quite nerve-wracking. Raising funds can feel like you’re selling a product, and that’s intimidating to many people. No one wants to sound salesy, especially to a friend or family member.
If talking to your friends and family feels counterintuitive, think of it this way, you’re not selling a product, but a long-term wealth opportunity. In an effort to help your friends and family reach their financial goals, you’re giving them an opportunity to invest their personal capital in an investment property that they wouldn’t otherwise have access to.
#3 – Don’t Wait for an Active Deal
Here’s our next tip for successfully raising private capital. Start the process of finding investors before you have an active real estate opportunity.
That’s right, even though human nature might be telling you otherwise, you should start raising capital for real estate before you have a deal on the table.
If this suggestion surprised you, don’t worry, there’s a method to our madness. By talking to potential real estate entrepreneurs before you have an investment property under contract, you’re giving yourself the gift of time.
The last thing you want to do is to rush potential investors into investing with you. That creates a sense of desperation, and investors can smell desperation a mile away. Instead, you’re able to discuss the potential real estate investments in a relaxed, no-pressure way, increasing the likelihood of investors wanting to move forward with you and become a business partner.
#4 – Create a Sample Deal Package
As you can imagine, potential investors will have lots of questions before committing to investing with you. They’ll likely want to know about potential returns, the type of asset, what exactly you’re going to do with their private money, when you’re going to give them their investment capital back, and more.
The best way to address all of these questions is to create a sample deal package. Regardless of if it’s a fix-and-flip or a real estate syndication, having a sample deal package breaks down for the investor what a typical deal might look like.
A sample deal package is simply a presentation, usually a PowerPoint deck, that includes photos, information, financials, and data about a sample real estate project.
When you talk to potential accredited 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. This is a great way to present a deal and attract investors without it feeling like a sales pitch.
Leveraging Your Talents On Your Next Real Estate Investment
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. Getting other people on board and creating a strategic partnership, at times, can feel like a difficult task.
Creating a solid real estate investment deal requires various talents and skills. If you’re a people person with a strong desire to see others succeed, raising capital for real estate investing might be a great fit for you. If educating potential investors sounds like your strong suit, you should consider leveraging that talent by raising private money for real estate investing.
If you’re interested in seeing how we educate each potential real estate investor before asking them to invest, I highly recommend you sign up for our free Passive Real Estate Investing 101 course. This course will walk you through the various real estate investing topics that we discuss with our potential investors before they invest and private money with us.
And, if you’re interested in learning more, we’d love to help you scale your real estate business and do bigger deals. Check out our premier program for real estate syndicators – Real Estate Accelerator.
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.