If you’re at all serious about raising private money to buy real estate, this will be a very important message.
Here’s why: the road to private money is paved with objections. That’s right – the better you can handle objections the more successful in getting private money you will be.
[special note: this post is specifically for new investors or real estate investors that are new to private money and just raising it for the first time]
You’re almost certain to face objections – commonly known as reasons why the particular private investor is not inclined to invest with you.
Some common objections are:
• What if the deal doesn’t pan out?
• What if something happens to you?
• My brother-in-law said this wasn’t a good idea..
Now, there are two ways you can handle objections from prospective private investors:
1. Cover the objections before they are brought up
2. Handle the objection after it is brought up
By far the easiest way to shortcut your path to “Yes, let me get my checkbook” is to handle objections before they even enter the mouth of the investor. You do this by anticipating them and then hitting on those points in your marketing materials, your pre-qualifying questions and your presentation itself.
Now – even in spite of your best efforts, the investor may still have a few lingering objections. And, I’ve written before many times about how important credibility is in getting private money. (e.g. Why should they invest with you? Why should they believe you? Why your investment instead of the mutual fund? Etc).
You must be able to ‘back up your claims’ and show beyond a shadow of a doubt that investing with you is a total no brainer. It shouldn’t just be “well, this makes sense,” the response you want is “how soon can I invest?”
There’s a big obstacle that new investors (or first time private money-getters) face with regard to credibility – and that is “but I’ve never done a deal before!”
Que the “DA-DA-DAAAA” organ music….
Incidentally, this is not one of those “it’s only in your head” type of fears. There is some substance and reality to it. And, this brings us to the biggest objection that you’ll ever face when raising private money and that is..
“Have you done anything like this before?”
If you’re raising private money for your very first real estate deal, you might feel all the wind go out of your sails at this point. You might feel like your goose is cooked. I’ve felt this way before a long time ago. But, have no fear because you can overcome this objection very quickly and easily!
In fact, you can overcome this so fast your head will spin. It’s really important that you’re an action-focused person though. You can’t just “wish” this solution into being – you actually have to go out and do it.
For starters, the “first deal dilemma” can be solved very easily. If you feel that you’re lacking enough real estate investing experience to effectively raise private money, there’s only one way to solve that:
Get some experience.
But, how can you get experience if you can’t get experience?!
Great question! Here’s what I did: I traded my time for sweat equity in deals with real estate investors that were active in flipping properties. I went to my local REIA’s and landlord groups and other business networking groups and I found and met investors who were doing deals. I asked them if I could partner with them. They said ‘no’. I then asked them if I could trade my time for sweat equity and help them out on their rehab in exchange for a small piece of the profits on the deal – about equal to what the job would cost (paint, clean up, marketing, etc.).
Now, also with this came the ability for me to talk with these investors, learn intimate details about the deal and get a good feel for the market. I was able to prove my merits.
What this effectively did was allow me to legitimately say that I had been in on some deals, knew the in’s and out’s and could have a lot more confidence when talking to private investors. It was a great way to get in on deals without any money out of my own pocket and build a portfolio of pictures (before and after) and additional knowledge that would prove critical.
Here’s another thing you can do when a potential investor raises an objection along the lines of “hey, you haven’t done this before…”
At this point, you should just point to other items of credibility: such as a good credit report, testimonials from other people in the business, a track record of success in other areas of your life and ask them:
“Mr./Mrs. Investor: have I said or done anything that would lead you to believe that I will not succeed in providing you everything I have laid out here today?”
Make the investor give you a good reason why they feel the deal won’t work. Many times, they will realize they’re being semi-irrational and will relent and move on to the next subject.
Sometimes staring down this objection and facing it head-on is the fastest route to blowing right by it. Kind of like the school-yard bully that you stand up to once and they leave you alone forever.
Now you have an additional weapon in your arsenal to use if it’s ever brought up. What I’ve found in working with countless real estate investors who are raising private money for the first time is that this objection is often biggest in their mind, not in the mind of the private investor.