How to Generate Private Money: Steps 3 & 4 of 6

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Finding financing is the biggest challenge for most investors.  I previously wrote How to Generate Private Money, listing the 6 steps in brief.  Over my next few posts I will break down each of these steps in detail; I will cover steps 3 & 4 today.

Step 3:  Find a great deal, illustrate a win-win, the deal and the risk

Goal:  Inform the potential investor about the deal, the risk and the opportunity

Solution:  Show some pictures, pro-forma, details on the property, what it will take to complete the project, exit strategies, length of time to complete, detail the risks and what’s in it for the investor.

Do’s and Don’ts:  Do not give best case scenario numbers.  Be realistic and set expectations that you can shatter.  Make it simple and easy to understand. If possible, reference similar successful deals.

Step 4:  Play the numbers game, all you need is one YES

Goal:  Get as many potential investors as you can to fight over funding your deals.

Solution:  Let as many investors as you can know what you do.  Network at REI Clubs, investment and professional groups.  Talk to everyone you know.  Get involved on online forums and social media.

Solution 2:  Market a professional website and give out free information.  With good content and useful information, you will build credibility and investors will come to you.

Do’s and Don’ts:  Do not stop once you get one or a few investors.  When you begin discussions with a prospect, get out there and find 10 more prospects.  You can never have enough private money.  Always follow SEC rules and remember, you are not asking for money you are offering the opportunity for investors to make a great return on their money.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.