3 Steps to Raise Private Funding for your Real Estate Investments
I’ve noticed over the years the people that really make it in their Real Estate business have access to unlimited funding to purchase investments with!
After my first Real Estate “empire” crashed in early 2002, I needed funding to get back into the game. This is not an easy thing to do when the banks know you failed miserably once before. I had to learn how to raise private funds to make deals without investors doubting me from my previous failure!
Here are the 3 steps I used to build relationships with investors, and how I now have access to more funding then I can find deals for.
1) If possible have a middle man/ woman introduce you to your new private lender. This is great as you have been “referred” to the investor and do not have to sell yourself from day one.
Every time I was referred to a new lender, I did it through a middleman. This wasn’t some shady ponzi technique, in casual conversation, I would listen for a problem to pop up, and I would offer to solve it. In exchange for helping them out, I would request they schedule a lunch meeting with the middleman, the potential investor, and myself. This technique has opened several doors for me.
2) When your meeting is set up have a very clear set of plans ready! Show your investor what you plan to do with their money and how it will be protected! DO NOT BE WISHY WASHY WITH YOUR INVESTMENT STRATEGY. This is a sure way to scare your investor off! When borrowing for Real Estate investments, you want to show the investor the following:
· What neighborhoods you plan on investing in
· The purchase price of the properties you plan on investing in
· Pictures of potential investments that are currently available and how you would flip each one. Be detailed!
· Your exit strategy on each deal they will be funding
· How their money will be protected and what return they can expect on their investment
3) The investor loves you and is ready to fund, CONGRATS! Now you have to be sure the investor doesn’t want to break up with you. Here is how you keep them in your pocket
· If the loan payments are due on the 1st, with a grace period till the 3rd, you always pay investors 3 to 5 days before the first! This small thing shows you have your stuff together, and will keep your investors mind at ease.
· Send bi-weekly reports on how the project is going. Do not bombard your investors with this as it may overwhelm them. Just a nice email with some updated pictures works great.
· If the unthinkable happens, (it always does) and you run out of funds, you don’t eat until your investor gets paid first! I see amateur investors lose access to funding as quick as they got it because they refuse to cut back on their lifestyle when the going gets tough.
Remember if an investor trusts you enough with their money, then you need to respect it, and deliver on everything you promised. In doing so you will have access to more funds then you can possibly invest!
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