Is finding money for your deals the biggest problem area for you as an investor? Would having access to mega funds help you do more deals? Are you losing out on opportunities because you have to have some “skin” in the game?
Private money is the answer. Stop struggling to finance real estate deal after deal, I decided to learn how to recruit private money. I have discovered that there are 3 “Vital” Keys to having all the money you’ll ever need for your real estate investing deals.
“Must Know” Key # 1: Plant Seeds!
That’s the most important thing that you can start doing right now! Every person that knows that you are an investor and that knows about your investment program, whether or not they are in a position to invest, is one more seed planted in the soil.
Here are a few examples of planting seeds:
- Just flat out tell someone
- Send out some form of direct mail letting people know about your program
- Put an ad on Craigslist
- Put an ad in the newspaper
- Put a link on your website describing your program
Any form of getting the word out about your investment program is “planting a seed”.
Over the first couple years of recruiting money, on average, it took around 4 months to get someone to invest with us after first mentioning our program and planting the seed.
Be patient! (this is the reason most of you don’t have enough private financing… you don’t stick with it long enough… remember, these people are putting their hard earned money in your trust and need to get to know you before they just write you a huge check)
There are two types of people most likely to give you money:
- People that know and trust you
- People that know a good deal when they see one
Keep this in mind when making your list of people to contact for funding for your real estate deals.
Once you gain some momentum and have investor clients that have experience in your program, go for the third type of people most likely to invest with you. And they are the best there is….
Referrals.
After a couple years of working with private money lenders, I didn’t have to go out and seek additional clients. They just came to me.
“Must Know” Key # 2 : Ask Good Questions!
Your job, when meeting with a potential investor, is to “sell” the idea of investing in your program.
In order to sell that idea, you must ask good questions! Asking good questions consist of two types of questions:
- Questions about the past
- Questions about the future
Questions about the past will tell you what kinds of investments someone has taken part in, what rate of return they are accustomed to getting, how previous investments have been structured and the results of their investing experience. This can tell you so much about how to set up an investment that works for them and that goes with their investment strategy.
Questions about the future will be more centered on their future goals. These questions will elicit whether they are looking for long or short term investment opportunities, if income is important to them and so on.
Never ask in the first person, I recommend saying. “Hey Bob, I know this is not for you, but would you happen to know anyone that is interested in earning a good return on their money in real estate?”
By asking good questions, you can give them what they want. And if you are able to give them what they want, they will invest with you! Bottom line.
“Must Know” Key # 3 : Structure the deal so that it works for you!
Just because you can get a deal financed doesn’t mean you should go through with it.
It has to make sense for you the investor. This is where the “creative” in creative real estate investing gets its name. There are limitless ways to structure an investment loan.
When structuring a real estate investment loan, it all starts by asking, “What’s my Exit Strategy?”
Your exit strategy will ultimately determine the ideal structure for your private money loan.
There are two basic pay structures to an investment loan:
- Rate
- Profit Splitting
Whether you choose to pay a nominal rate or split profits with your investor, the easiest money on you would be…
“No payments, loan is repaid when the property sells.”
Setting up an investor loan like that will put you in the driver seat. If you plan to hold the property for some time, it may make more sense to make regular interest payments to your investor.
Those are 3 vital keys to getting millions in Private Money for your real estate investing deals. Of course, this isn’t meant to be a comprehensive tutorial…. it’s an excellent primer to get yourself off on the right foot.