4 Simple Steps for Newbie Investors to Start Raising Private Money

4 Simple Steps for Newbie Investors to Start Raising Private Money

3 min read
Mark Ainley

Mark Ainley is an investor, managing broker, and property manager with almost two decades of experience in real estate. Mark has been a speaker at numerous events across the country including investing summits in Dallas, San Francisco, and Chicago.

Experience
Mark’s extensive experience allows him to share his knowledge and experience on many topics like property management, scaling a business, rehabbing and flipping, out of state investing, asset stabilization, market analysis, and more. Mark found his way into real estate by purchasing and flipping condominiums prior to the Great Recession, and since, he has built his own portfolio of rental portfolio alongside co-founding GC Realty & Development LLC (GCR&D), a full-service real estate brokerage, property management, and investment firm, and GC Realty Investments (GCRI). He has rehabbed and stabilized over 450 properties and currently manages over 900 investment properties throughout the Chicagoland area.

GCR&D consults with both local and out of state investors on the acquisition, stabilization, and management of their rental property portfolio, as well. In recent years, both companies have grown to include over 25 full- and part-time employees, running the management and development divisions with 27 additional brokers getting deals done.

Mark was featured on CNBC’s TV show The Deed, which chronicled one of his rehabs. He has also been featured on podcasts like the BiggerPockets Podcast, The Real Estate Mogul Podcast, Joe Fairless, REI Diamonds, and Positive Phil. In 2017, he was featured on the cover of Top Agent—Property Management Edition.

Mark loves to give feedback to beginners or less experienced entrepreneurs on what steps not to take or what steps to take sooner in growing a younger business.

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If you talk to a seasoned investor, raising private money is one of the most important things they can do. To be honest, it isn’t all that difficult. Once you’ve established a track record, it becomes easy to raise money. As a matter a fact, you’ll be in situations where you’ll have to turn away money because you don’t have a use for it. What a great spot to be in, right? But what you don’t realize is how long it takes to get to that point. Hopefully after reading this, you’ll be one step closer to being able to access all of that private money.

4 Simple Steps for Newbie Investors to Start Raising Private Money

Create a Track Record

I don’t think this can be said enough. You want someone to lend you money on a deal and you have never even done a real estate transaction? Get real.

I have to say, I have avoided some of my local investors because I’m tired of seeing people introduce themselves saying they have no experience and are looking for private money. Really, what you should be saying is, “I have no experience, and I am willing to do anything to partner up with someone who does.” There really are no shortcuts to this. Can you convince someone to give you money without a track record? Sure you can, but it will always be an uphill battle. It will be quicker and easier to find someone to partner up with and learn from.

Let me speak to the partnering up thing, too. I’ve sat down with a lot of new investors and it pisses me off when someone says they want me to teach them what I do and how I do it. From what I can tell, all they offer to me is their company. You riding around with me all day soaking up all the information that I can give you does nothing for me. You are a distraction more than a help. Offer something of value in return. Guys, don’t become full time investors without having put in many hours to get there. Why should they give you the whole process gift wrapped? Just because you’ve asked for it?

End of rant.

wholesaling-success

Related: 10 Smart Tips for Building Trust With Private Money Lenders

Remember: You’re the Prize

I went to a syndication seminar a while back. There was some good info there, but one of the biggest takeaways that I got was there is more money than deals out there. And that is always the case. People are always looking for good deals.

Once you’ve established competency in putting a deal together, stop begging for money. You have something that people want. It is a deal that offers a great return in exchange for lending you money. And above all, it is collateralized. A very clean, asset-backed loan. I would like to share a little tip that I have found: “People who are most interested in this offer are the people who are looking for capital preservation instead of capital growth.”

People who are in their 30s and 40s still think they are going to buy into the next Facebook. When they get to their 50s, they realize that they probably won’t find it and settle into a more conservative portfolio. Asset-backed lending fits that bill.

Be Professional

The more you act professional, the more people will trust you know what you are doing. Make sure you have the proper documentation. Pay a lawyer to draft it up. Understand what your documents say. Nothing blows a deal faster than when you get a call from your investor asking you a question about the paperwork and you don’t even know what he is talking about.

Create a checklist to make sure that you are on top of all the paperwork. One thing that we got incredible feedback from our lenders was a simple monthly statement.  It shows the loan amount, the collateral, any payouts and a running total of how much money they’ve made this year. This leads me to my next point.

Related: The Definitive Guide to Finding Private Money Lenders in Your Network

Start Small

Don’t be afraid to start small. If you are looking for $50,000, it might be better to find five people who will contribute $10,000 each. (Talk to your lawyer about how to write up the paperwork correctly to secure everyone’s interest.) Also make sure that you send MONTHLY interest checks along with that statement.

I can’t tell you how often those same investors who may have been on the fence writing the first check call me up after a few months and say that they want to put in more money. Receiving that monthly check along with the statement showing how much money they made gets them thinking about all the money sitting in the bank that they aren’t using.

Why It's Important to Become Successful Slowly In Real Estate

Conclusion

Raising private money isn’t that difficult if you are ready to do some work and use your personal finance, too. You need to give to get. That’s how it works.

What are your experiences with raising private money?

Please share in the comments below!

If you talk to a seasoned investor, raising private money is one of the most important things they can do. To be honest, it isn’t all that difficult. Once you’ve […]