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The One Simple Thing Required to Raise Unlimited Money From Private Investors

by Brandon Turner on December 28, 2013 · 20 comments

  
Raise Money From Investors

I know private investors are tough to find, especially if you are just starting out.

I’m not sure your experience level, but put yourself in their shoes for a minute: private investors have a lot of money because they’ve worked hard for a long time. (Okay, some of them, perhaps, inherited the money or were just lucky – but most of them are smart and have worked hard.) Therefore, private lenders don’t throw their money around – especially to new investors. So it feels like a catch-22. You can’t raise money until you have experience, but you can’t gain experience without money.

What’s a newbie to do?

The One Thing Private Lenders Care About

Deep down, I believe that most private lenders care primarily about one thing, above all else, and if you can offer this one simple thing, you can get more money than you could ever handle.

Do you know what this is?

Simple:

Security

Pretty much, everything boils down to this one thing. If you can solve this concern, you can find unlimited money in this world to fund your real estate deals.

Seems almost too easy, doesn’t it?

The fact is – it is easy to understand, but a little harder to carry out. Isn’t this the case with most things in life? After all – we all know how to get a six-pack… but how many of us really do what it takes to get there? I know I need to stop eating candy, do a lot more crunches, and jog everyday… but the couch just seems so much more appetizing, doesn’t it? (Though… I’ll have you know…I just got P90x3 for Christmas and have started… just wait!)

So how do you solve this concern? Let’s talk about it…

Security and Raising Private Money

As I mentioned before, people with money have it because they’ve worked hard for it.

Perhaps they’ve scrimped and saved for 40+ years, or perhaps they spent years of nights and weekends building a profitable business. Either way… they are not about to throw away their hard earned cash on a risky bet.

So how can you reduce their risk and increase their security?

Through great deals and strong competence.

The two go together like peanut butter and jelly, like the Lone Ranger and Tonto, like Bert and Ernie.

If you are having trouble raising money because you are being turned down by everyone you approach, you are lacking in one of those two areas. It’s as simple as that. Don’t try to convince yourself otherwise. Perhaps you have a great deal, but you lack the knowledge/competence to make the deal succeed (in the eyes of the investor, at least.) Or maybe you have the competence, but you lack the great deal. You need both.

If you find a house worth $1,000,000 that you can buy for $40,000 – I would wager you wouldn’t have a problem finding money. However, the second half of that equation is competence. Even an amazing deal can turn sour if the person in charge is not 100% capable. So the best way to increase that is to learn more, read more, study more, teach more, and network more. Hopefully that’s why you are here, and why you are a part of BiggerPockets. To learn how to become a better investor.

Get it?

However, if you are not attracting financing because you aren’t asking for it (or asking properly) perhaps there is another issue. One of my favorite moments in the recent Podcast interview with Mike Simmons here on BiggerPockets was when Mike told the story of how he and his wife told EVERYONE about what they were doing in real estate. They blogged about it, spoke at REIAs about it, talked with family and friends about it, and shared their story with everyone who would listen.

Awesome, isn’t it?

Be Like Mike. Start talking about your goals, your dreams, your actions. What are you doing, right now, to become a better real estate investor? Whatever your answer is… go post it on your Facebook page! Seriously, like right now. I’ll wait. And while you are over on Facebook, be sure to “Like” BiggerPockets as well. Or just click this little like button right here:

Conclusion

Alright – hopefully you can see how easy it is to know how to raise money: by offering security.

However, as this post has laid out, this is easier said than done. However, if you keep this one thing in mind as you grow, learn, and expand your business, you’ll find no trouble raising money to fund your killer deals.

So continue learning and gaining competence. BiggerPockets exists for this one reason – so take advantage of it! If you haven’t read through The Ultimate Beginner’s Guide to Real Estate Investing yet, start there. Then check out the Podcasts (AMAZING interviews) and introduce yourself in the BiggerPockets Forums and let everyone know who you are.

Questions? Comments? Concerns? Leave ‘em below and let’s chat!

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{ 20 comments… read them below or add one }

Gerald Harris December 28, 2013 at 8:05 am

This is great information. I have always stuck to Hard Money, but it gets expensive. The spread may be attractive, but is tough when dealing with hard money.

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Brandon Turner December 28, 2013 at 12:05 pm

Thanks Gerald – yeah, I used mostly hard money for years, but lately I’ve been investing with some private guys – and it’s wonderful!

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Jay O. December 28, 2013 at 4:59 pm

Great article Brandon.
Feel a whole lot better knowing I can bring a lot of security to the table having owned two businesses. One being a Contracting Painting & Design company. Nothing like experience being a great portion of skin in the area of REI as well as bringing the value of experience as an asset in a deal. At least when it comes down to Flips/Rehabs/Remodels. Looking more forward to the investing side of things though, but will always be ready to roll up my sleeves on any day, any deal, that worth it. Thanks again Brandon. Awesome as always!

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Roy Schauer December 28, 2013 at 8:59 am

Great post Brandon! For the month of December, as things slowed down for the holidays, I’ve been concentrating on streamlining processes and most importantly networking. This is such a critical aspect of the business. I was going to REI meetings and talking to people before, but I’ve taken it to a whole new level now. We are running an REI group of our own, sharing basic real estate information with locals, joined a local referral network, and had countless one on ones with other business owners. The goal is in sharing information with others we put a “face” on our business. It becomes less about another business and more about people that others can trust. When you want to do business with someone, who are you more likely to throw the deal to? It’s amazing the amount of great people and relationships we’ve built in just the past month!
Which leads into that credibility factor. If your credible and you have a deal, your more likely to find an investor. Business and investing are a mindset. Go where the mindset is and build those relationships.

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Brandon Turner December 28, 2013 at 12:06 pm

Hey Roy, thanks for the great comment! Looks like you are doing everything right with your business and you “get it!” Keep rocking it!

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Steven December 28, 2013 at 2:51 pm

Brandon,

Great information! I hope you can make this a series of articles on creating the perfect deals. Maybe next talk about the importance of credit or how your credit can make or break a deal and what to do to maximize your credit standing. Just a thought.

But still, great information and thanks for posting it.

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Brandon Turner December 30, 2013 at 9:33 am

Hey Steven, that’s a great idea. I’ll mull it over and see what I can put out!

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Mark Ferguson December 29, 2013 at 10:06 am

Brandon, I did the first p90x about 6 years ago and it works your a** off. You better be ready to commit an hour a day to it. If you can it is a great program. I actually implement a lot of the techniques I learned from p90x I to my current workouts.

Anyway you are dead on. Most investors that have problems, aren’t finding deals. They think they have deals, but there ultimately is not enough room for other investors or even themselves to make money.

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Brandon Turner December 31, 2013 at 2:54 pm

Thanks Mark. Yeah, this thing is killing me already. I did P90X a year ago and it was great. This is nicer, because it’s shorter, but it’s more difficult.

Thanks Mark!

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Sharon Vornholt December 29, 2013 at 11:35 am

Brandon -

I think there are two parts to this equation. The first part is all about actually having a “real deal”. Most of these folks will be able to tell immediately if it isn’t a deal. And just like you said, you have to be a credible investor; they are not only investing in your property or business proposition but they are investing in you personally. They are investing in your reputation, your skills, your credibility and so much more.

Secondly, you must have the ability to pitch your deal. This comes back to your credibility and your communication skills. The moment you have to try to “convince or hard sell” someone rather than just presenting this great business opportunity to them you’re in hot water.

Happy New Year.
Sharon

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Brandon Turner December 31, 2013 at 3:00 pm

Very true Sharon! Yeah, many people have good deals but just don’t know how to sell themselves or their deal. I guess I’d chalk this up under the competence thing, but it could be separate for sure. Thanks for jumping in!

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Giovanni December 29, 2013 at 3:50 pm

Great post @Brandon, you nailed it.

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Brandon Turner December 31, 2013 at 3:00 pm

Thanks Giovanni! I appreciate the comment!

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Brian Burke December 29, 2013 at 7:22 pm

High net worth people that I have met have one major goal in common: to not lose their money. A secondary goal is to earn a return. If they believe that your opportunity will accomplish their primary objective of minimizing risk, and also provides a likely outcome of earning a return that equals or exceeds their options (with similar risk profiles), and they TRUST YOU, they are likely to invest with you. Good article, Brandon!

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Brandon Turner December 31, 2013 at 3:01 pm

You would be the #1 guy that would know! When I start raising money for bigger deals, I’m definitely coming to you for advice!

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tom December 29, 2013 at 11:09 pm

Brandon, Great reminders. I have been working on my private financing for a bit over a year. Started small by using hard money for most of the most of the financing on a project and using private money for 10-20%. This saved me a little money and the private money didn’t have the monthly payments.

With every deal I have gotten more money and I am currently financing my deals with 100% private financing.

It can be done. I think the first thing you need to prove is you have a successful history of investing.

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Brandon Turner December 31, 2013 at 3:03 pm

Thanks Tom! Private money can be a lot cheaper, and great win win for both parties. I actually need to step up my game with this!

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Jason December 30, 2013 at 7:41 am

Brandon,

So very true. One suggestion to aid with that. I go into every deal thinking about the investor first. How can I make sure they are safe. Its our consuming thought. If my wife and I have to sell all our rentals just to make that investor right should something go wrong we are prepared to do so. We go into each conversation with that mindset and commitment. I think investors can sense that.

Jason

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Brandon Turner December 31, 2013 at 3:04 pm

Hey Jason,

Thanks for the comment and the awesome suggestion. Perfect!

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Shaun January 1, 2014 at 8:10 pm

Very good points.
One of my big goals for this year is to bring down my cost of money.
Hard money is great to work with and can get you in the game but is expensive. You can really improve your margins a lot by bringing this cost down. Just saving on points and fees while giving double digit interest can be great.

Reply

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