The Best Ways to Raise Private Money

 

Every month, if not every week, I go to Real Estate Investment meetings all around the tri-state area and recently the New York area as well.  I usually attend these meetings to network with investors and many times speak on a multitude of subjects. Working in nearly every capacity of the real estate business, I get asked a lot of the same questions by people new to investing.  Having raised millions of dollars for multiple companies (including my own) I’m always asked for advice on raising private money.

 

 

How I got started

 

When I first started raising private money, I learned from fundraising for a company that wasn’t even my own.  I came into the job by chance when I ran an extensive Real Estate networking group in Philadelphia.  This new company came along and saw I had such a large network; they hired me to raise money for them. The company I worked for was investing in real estate (mobile home parks specifically) so I would travel to many real estate networking groups and raise money.

 

Some techniques…

 

One of the best ways to raise money is to ask people you already know or have a relationship with.  Especially if you have made them money before or have a track record of similar projects, they usually will be more inclined to work with you.  And remember if you don’t have a track record, you could always use your mentor’s company record.  You need to demonstrate you know what you’re doing or you’re working with people who do.  You have to come across with integrity, confidence and above all honesty and trust.

 

When venturing outside of friends and family, like in my case where I would meet new investors, the process is simply to be as good of a listener as you are a talker. You should ask people with genuine interest what they do for a living and what exactly they are looking for in their specific investment.  You should then try to find a jumping off point from what they say, usually by asking what they’re having success with.  Either with that technique, or the other person merely returning the favor; you’ll be asked what you do. That’s when you tell them you raise private money for a living and the type of project you’re currently raising money for such as mobile home parks, commercial office condos, or notes, and then the rest is simple.

 

Why just raise money for one small rehab project when you could purchase $30 million in mobile home parks with just $8 million of private money like we did.  How many rehab deals could you do with an unlimited supply of money? This is also how I raised money for my own company PPR to purchase delinquent loans & mortgages in bulk from banks. You could manage more notes then you could manage properties any day.

 

So what are the three best ways to learn how to raise private money?

 

• Like me, raise private money for someone else’s project and learn from their expertise, resources, and network.

 

• Raise private money for a charity

- It’s a good cause and charities are often times easier to raise money for than a traditional company.

 

• Teach Raising Private Money

-       The best place to teach it is at self-directed IRA companies’ events.

 

 

My last piece of advice…

 

TRY USING A PRIVATE PLACEMENT

 

Sometimes it’s the best insurance when starting a newer venture and it protects all parties in case there’s liquidation in the future.   

 

You get the needed capital to move forward with your project and the investors aren’t involved in your day-to-day operations.  They’re protected because all risks have been thoroughly disclosed to them in advance. And if the project doesn’t work out, the dissolution of the company can be completed in an orderly fashion.

 

Best of all, the legal and accounting start up costs can be expensed through the funds that are raised.

 

So what are you waiting for? Don’t lose another deal because you couldn’t get the money, raise it yourself! Today I practice what I preach, I teach raising private money as many places as possible, including my company’s bi-monthly events just outside Philadelphia, PA.

By: Dave Van Horn