How To Attract Private Investors To Your Real Estate Investments

It's no secret that private investors are attracted to real estate investments because of the potential of higher returns. When you can scoop up investment properties that generate annual returns on investment of 20%, 30% or more, it serves as a "magnet" to wealth. Capital always goes where it is most welcome and eventually flows to the most efficient resources.

Money Flows

Think of money like mercury in a dish - it is liquid and flows through the paths of least resistance. This is a simple economic principle - and a big part of why I believe any real estate investor can have private investors fund their deals. You're simply obeying fundamental economics and applying it to real estate investing.

What Are You Offering?

Contrary to what you might think, "secured" returns -  such as those with private mortgages - are not

always enough to entice private investors to your opportunity. Considering that many people still think real estate is "not good" based on all the scary national headlines, you might be facing an uphill battle convincing private investors that "secured" is all they need when your selling the investment to them - you may have to go a few steps further.

•  Demonstrate a strong returns on investment - chances are you'll have to offer something commensurate to alternative investments. If you're buying foreclosure houses or commercial short sales, the returns generated should be very high - you can afford to pay a good return to a private investor and profit handsomely yourself.

          o As you present deals to private investors, consider showing them a strong margin of safety. Chances are you can buy for such a low price that even further adverse market conditions will likely not impede long terms gains.

          o Showing strong returns even in spite of rent or market price declines will connect the dots for the investor and warms up their hand to write you a check

•  Real estate investing is still the most tax advantaged investments available. Fortunately, your private investors can benefit tremendously by placing funds in your private loans or private placements

          o Depreciation - allows your private investors to pay taxes on less money than what they received. This applies to private equity investments as opposed to loans, and the benefits are huge. With accelerated depreciation, you and your private investors can keep more of the money that your business makes

          o 1031 exchanges - allows you to roll the profits from one property into another of equal or great value and defer paying taxes on the gain upon sale (note that you must use a qualified intermediary for this)

High ROI and tax advantages are just two ways you can attract private investors to you real estate investments. In the future, I'll discuss: inflation hedging, diversification and other techniques to help you attract investment capital.

Fundamentally, you should always keep at the top of your mind that you have something of tremendous value to offer. Even if you are raising your first million dollars, you are providing a great return on investment and long term appreciation of capital that creates wealth.