Mortgages & Creative Financing

4 Non-Hard Money Sources to Raise Capital Fast (Including Tips From Bestseller Neil Patel)

Expertise: Real Estate Investing Basics, Personal Development, Real Estate News & Commentary
38 Articles Written
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It’s a common fallacy that you need large amounts of money to get started in real estate. Sure, if you’re doing bigger deals, you need larger sums of cash, but buying real estate with no skin in the game is a fairly common real estate investment structure. For years, that’s what the big billionaire developers did. In fact, one BiggerPockets investor seems to scoff at the notion that he should have any skin in the game at all!

Be that as it may, the reality is there’s plenty of money out there just looking for opportunity. And if you have the right deal, the money will listen. So, if you’re a new investor—or even a seasoned one—here are four sources to fund your first (or next) deal.

1. Private Investors/High Net Worth Individuals

You’d be surprised who’s down to invest. 

A while ago, I spoke to New York Times bestseller Neil Patel, a prominent tech entrepreneur and digital marketing mastermind who’s built a series of businesses, including recognition as “a top 100 entrepreneur under the age of 30” by President Obama.

Related: How I Find Private Money Lenders to 100% Fund My Deals (& How You Can, Too)

Despite earning his stripes as a rockstar tech guy (check out his stuff here—it’s pretty dope), Neil’s super involved on the investment end. “I got involved with real estate because I was looking for places to find money,” Patel told me.

His first deal was a 296-unit mismanaged multifamily complex in Vancouver, WA with 30% vacancy.

“A distressed asset. They couldn’t figure out how to make it work. [We] put down $6 million, $20 million from the bank,” Patel said. “Three, four years later, we pretty much doubled our money.”

A great way to attract the capital is to basically show the person with the money how said money will help them make more money—all the while making sure they won’t lose it. 

“A football player came to me and said, ‘I want to do a real estate deal, I’ll give you 8% on your money,’ which is a good deal—I’ll take 8% all day long,” Neil said, assuming the borrower has assets to collateralize. “How much do you need?”

Moral of that story: People with capital to deploy are always looking for deals.

To show the feasibility—i.e. how they will 1) not lose money, then 2) make money—I personally use a software that analyzes the deal, runs the numbers, spits out a pretty three-page report with graphics, risk, upside and so on, which makes it easy to present the highlights of the deal. (Shoot me a private message if you want a copy.)


In fact, if I’m shopping for financing on the private market, I totally bypass the standard forms and just use those reports. It takes me five minutes and makes their job easier, too.

2. Investment Clubs

Similar to a fund, an investment club is loosely defined as “a group of individuals who meet for the purpose of pooling money and investing.”

So how do you find ’em? A quick Google search will yield results. Here’s what Investopedia says:

By law, investment clubs are not allowed to recruit members because it could be viewed as part of an investment scheme. This means that the onus is on you to approach a club.

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BetterInvesting, formerly known as the National Association of Investors Corporation, is the pre-eminent advocate of collaborative investing. It maintains extensive archives of information for starting and maintaining investment clubs.

Notice it said that the onus is on you to approach them, whether it’s for the purpose of joining or pitching. Again, these groups are looking for deals.

What GPs/sponsors typically do is put together memoranda highlighting the deal, the financials, the capital requirements, and what the terms are. Here’s one from Avistone, a California-based landlord with 1.5 million square feet under operation. 

                             

Avistone’s PDF is actually pretty neat. But the thing I’ve learned is that most of these tools come from the old school, which means any ignorance can work in your favor. Private placement memoranda are horrifically archaic. I mean, look at this.

Sure, for a big fund or projects, you definitely need it, for the legal reasons more than anything. (And the lawyers love it because only they can decipher so it greases their wheels.)

What works for me? I cut through the jargon and boilerplate, get to the point quickly, and have some visuals to come along with it—not unlike how tech companies pitch their startups. Concision counts.

3. Syndication/Pooled Funds

Similar to the idea above, you simply pool the money yourself and go for the deals. And there are tons of ways you can do it, some more complex than others. (I personally love simplicity in my deals.)

The process of assembling the money is similar to the one described above, except you now become the entity that wields the muscle, depending on the size of endowment, of course.

My first investment vehicle was raised through a mix of #1 and #2, namely private investors and a big family office. Naturally, the terms are more restricted in that sense. I recently raised an opportunistic fund using this strategy outlined here.

Related: 3 Creative Strategies to Finance Real Estate Deals

What it did for me was grant me freedom to aggressively pursue more deals with far greater flexibility. But if you’re just starting out, it could be something as simple as a tenant-in-commons situation or a group coming together here on BiggerPockets, which happens all the time.

Or even Meetups and coworkers. Example that happened just yesterday: I’m knee-deep in two developments at the moment, but was sent a tremendous off-market deal in Jersey City, $250k for a two-family that just hit.

So, what I did was send it around to a few people who could be interested, and in a matter of minutes, the equity was pooled (from a lawyer and consultant) and I’m helping the group make a bid.

See how easy that was?

4. Boutique Accounting Firms

I was actually surprised this was an option, but really shouldn’t have been. If you’re raising a fund, you’re limited to accredited investors (although regulations have loosened in recent years; read more here)—and that lowers your talent pool dramatically.

However, smaller accounting firms have lots of non-rich with decent net worths, in the mid-six figure range. Not quite millionaires, but more than enough to add real estate to the portfolio. And with it being a smaller company, the CPAs may have a more informal relationship with their clients.

Again, here a great presentation comes in super handy, especially because they may not be hardcore real estate folks. So they often want the numbers simplified.

True story: A guy who owns two blocks in prime Bedstuy, Brooklyn heads one of those groups with big signs that go “WE BUY HOUSES CASH! QUICK CLOSING!”

I went to the guy with a deal we were looking at, complete with a report that laid out all sorts of stuff. Equity multiples. Unlevered vs. levered cash flows. Exit projections. Three-year IRR, five-year IRR, waterfall distribution, the next lunar eclipse—you name it, it was there.


“We don’t care about that,” the guy said. “Just tell me what the [money]in and out is and what period of time we’re looking at.”

And more often than not, that actually gets the deal done.

Featured Photo Credit: Mugabe Woodside, @baswoods

Readers, what are some non-hard money sources you’ve gone to to raise capital quickly?

Please share below. 

A native of Denmark, Philip came to New York in 2014 with $79 in his PayPal account. In 2015, he joined Bisnow Media (the largest commercial real estate news source in North America) and helped lead them to a $50M sale as National Editor and Director of Content Strategy. Founder of NYEG, a real estate & VC company with $80M in the development pipeline, Philip and his team are currently developing a series of historic projects, including the first black-owned high rise in Jersey City, the first smart home development in Jersey City's McGinley Square, and the first voice-controlled student housing building in Philadelphia. Philip is the best-selling author of Real Estate Wealth Hacking: How To 10x Your Net Worth In 18 Months and an expert columnist for Forbes, Black Enterprise, Entrepreneur and others.

    Ali Hashemi Investor from Southern Indiana, IN
    Replied over 1 year ago
    Very cool! I like and appreciate your ‘tech style’ direct to the point style.
    Philip Michael Developer from Brooklyn, NY
    Replied over 1 year ago
    Thanks, Ali! Glad you liked the piece!
    Bunmi Familoni Investor from West Orange, New Jersey
    Replied over 1 year ago
    Great tips, Michael thanks for sharing! Would love to try out your financial reporting software. Let me know. Thanks!
    Philip Michael Developer from Brooklyn, NY
    Replied over 1 year ago
    Glad you liked it and thanks for reading!
    Bob Quirk
    Replied over 1 year ago
    Great article and info. I also would love to get a copy of the 3 page report. Thank you
    Jeff Kemmer Flipper/Rehabber from Clovis, CA
    Replied over 1 year ago
    Hi Phillip, i appreciate your writing this article…..great info and very useful. I would like to take you up on your offer to send me a copy of your presentation software. Thanks again!! Jeff
    Benjamin Haberman Real Estate Broker from Ocean View, NJ
    Replied over 1 year ago
    Great article. Thanks again
    Benjamin Haberman Real Estate Broker from Ocean View, NJ
    Replied over 1 year ago
    Great article. Thanks again
    Jerome Lewis Jr Real Estate Agent from Philadelphia, PA
    Replied over 1 year ago
    Excellent article. I’m interested in the reporting software.
    Account Closed
    Replied over 1 year ago
    Great Article Philip, lots of great pointers into the “raising capital space” which is a big missing link for alot of newbie investors. I would love to check out your software for analyzing deals.
    Jim Collins Investor from St. John'S, Newfoundland and Labrador
    Replied over 1 year ago
    Hey Michael, Agree, great article and you are right, pooling can be informal, I have done 4 deals 3 residential and one commercial in which the terms were basically worked out over a beer in the shed with my neighbors, followed up with some paper of course! Would like to try your software as well, looks simple and effective. Thx, Jim
    Philip Michael Developer from Brooklyn, NY
    Replied over 1 year ago
    Haha that’s awesome! What I omitted from the article was that I actually sat in a traffic jam and pooled the money via text and one call. Everything doesn’t have to be PPMs and legalese. (Although the paperwork does have to be right when it’s time to strike!)
    Philip Michael Developer from Brooklyn, NY
    Replied over 1 year ago
    Haha that’s awesome! What I omitted from the article was that I actually sat in a traffic jam and pooled the money via text and one call. Everything doesn’t have to be PPMs and legalese. (Although the paperwork does have to be right when it’s time to strike!)
    Alex. Viernez
    Replied over 1 year ago
    Aloha Michael, Please send me a copy of the software that analyzes the deals. Great article! Looking forward to seeing and reviewing the software package. Mahalo, Alex V.
    Eric S. Realtor from Grand Rapids, MI
    Replied over 1 year ago
    Good article & how to break it down to investors. Your 3 page report looks good please send me more info. Thanks Eric
    Justin Mann Real Estate Broker from Clemson, South Carolina
    Replied over 1 year ago
    Great tips. I’d love a copy of your deal analysis software when you have a chance. Thank you
    Brad Bieze Banker
    Replied over 1 year ago
    As others mentioned, nice article and great tips. Please send me the software too. Thanks, Brad Bieze
    Sterling Anderson Developer from Omaha, NE
    Replied over 1 year ago
    Awesome Article Philip. Answered some questions for me that I had as im raising more funds for our multifamily investments. I also sent you a DM for the software. Great stuff man
    Joseph Lynch III from Iowa City, IA
    Replied over 1 year ago
    I am also interested in the software
    Kenny Lee Investor from Elk Grove, California
    Replied over 1 year ago
    Hi Philip, Thank you for the insightful article, would you mind sharing the software mentioned in the article? Thanks. Kenny
    Todd Rodgers
    Replied over 1 year ago
    Good stuff! I’d like a copy of your software as well. Thanks!
    David Smilansky
    Replied over 1 year ago
    Good article Philip and thanks for the tips and the pointers. I would love to look at the copy of the software you mentioned in your article. Thanks, David
    David Smilansky
    Replied over 1 year ago
    Good article Philip and thanks for the tips and the pointers. I would love to look at the copy of the software you mentioned in your article. Thanks, David Reply Report comment
    Alessandra DeYotLovo Investor from Stamford, Connecticut
    Replied over 1 year ago
    Philip, great article, educational yet straight to the point. I am also interested in the software that analyzes the deal, runs the numbers, etc. Would love to learn more about it. Thanks! Ale
    Lily Daudert Investor from Albany, Oregon
    Replied over 1 year ago
    Great tips. I am also interested in the software. Thank you!
    Shannon
    Replied over 1 year ago
    Super timely! Just getting into bigger deals and would really appreciate your software that you mentioned.
    joe
    Replied over 1 year ago
    I would like to try your software as well, thanks
    Andrew Allen Investor from Austin, Texas
    Replied over 1 year ago
    That’s interesting to read about Neil. I wonder how long ago that was and how many losing investments he’s made. I’m guessing he made money on that one but lost on a bunch of other ones…He repeatedly says on his podcast that he lost money when he invested in things outside of his company, and now he just thinks everyone should reinvest their money back into what they know.
    Philip Michael Developer from Brooklyn, NY
    Replied over 1 year ago
    Hmm, good question, Andrew! Didn’t ask him but I’ll ask. Maybe he can respond himself! Haha. He did stress when we spoke to invest in WHAT YOU KNOW. Also stressed that you make money on the buy. Seemed to me that he was crushing it pretty handily in real estate — mainly because you can hedge your bets via collateral. I’ll try and ask about that. Thanks for reading, Andrew!
    Frank Stanzione from Wilmington, Delaware
    Replied over 1 year ago
    Hello Michael nice article would like to look at your software since it is simple and quick. I invest in Student housing and you have to move fast or the deal is gone. Thanks
    Derek Feeser from Saint Paul, Minnesota
    Replied over 1 year ago
    Great article Philip! As many others are asking, I would also like to know what that software is! Thank you in advance!
    Susan Selig Real Estate Agent from Atlanta, Georgia
    Replied over 1 year ago
    I appreciate your sharing with us! Great job. I would love to have your deal analyzer software. THANK YOU!
    Wendy Schultz Property Manager from Wisconsin and Florida
    Replied over 1 year ago
    Thank you for sharing. It’s very timely! Please send me the analyzer as well!
    Cathie Kovacs Rental Property Investor from Stamford, CT
    Replied over 1 year ago
    Would love the software link as well please
    Trevis Roberson from Houston, Texas
    Replied over 1 year ago
    These are some great tips for a newbie like myself . Thanks for the great article. Can you send me a copy of the software as well.
    Trevis Roberson from Houston, Texas
    Replied over 1 year ago
    These are some great tips for a newbie like myself . Thanks for the great article. Can you send me a copy of the software as well.
    Jim Kilpatrick Investor from Longview, Texas
    Replied over 1 year ago
    Thanks fo sharing your story. I am interested in the aofrware you mentioned.
    AJ Carter Real Estate Investor from Mesa, Arizona
    Replied over 1 year ago
    Loved the article. A lot of food for thought. Would also like to get a copy of the software to analyze deals. Thanks in advance.
    Dennis Pape Residential Real Estate Broker from Port Charlotte, Florida
    Replied over 1 year ago
    Great article! I would definitely be interested in checking out your financial report software. Thank you.
    Carolyn Lorence from Round Rock, TX
    Replied over 1 year ago
    Super helpful article, Philip! Thanks for the great resources. Will PM you to request a copy of the analysis software.
    James Schoeman
    Replied over 1 year ago
    Thank you for sharing. A lot of food for thought. Would also like to get a copy of the software to analyze deals. Thanks in advance.
    Tiffany Reese Real Estate Agent from Dallas, TX
    Replied over 1 year ago
    Great article! Thank you for the info. I’d also like a copy of the software to generate an easy-to-read report for potential investors.
    Charanjit Singh from Hallam, Victoria
    Replied over 1 year ago
    Hey Philip. Awesome post. And Neil patel is always a role model of many marketers cum Entrepreneurs. In short, Awesome Story with awesome content. Thanks for sharing.
    Philip Michael Developer from Brooklyn, NY
    Replied over 1 year ago
    Thanks! Happy you liked it!
    Philip Michael Developer from Brooklyn, NY
    Replied over 1 year ago
    Thanks! Happy you liked it!
    Saffron Bright-Rawlings Flipper/Rehabber from Eugene, OR
    Replied over 1 year ago
    Great article! Thank you.
    Patricia Burns from Kapolei, Hawaii
    Replied over 1 year ago
    Great tips, would love more info on your software. Thanks
    JOE MILL from Brooklyn, New York
    Replied over 1 year ago
    Hey Philip, Superb article. Very helpful and in depth. I would live to use that software for a deal I am trying to get through now. Let me know if you are able to send to me
    Duc Ong Real Estate Agent from Honolulu, HI
    Replied about 1 year ago
    Thanks for the insight! Please send me the software as well. I appreciate it!
    Julius Davis II from Fairburn, Georgia
    Replied about 1 year ago
    This article was very informative for someone just starting out and I would really appreciate being able to use the software you reference to create the investor document. Please share if possible.
    Lisa Johnson
    Replied about 1 year ago
    Hello great post! Please share a copy of the software?
    Robert Paltridge Investor from Sea Girt, New Jersey
    Replied about 1 year ago
    Great article. I like, all the others, would love a copy of the software. Thanks for sending.
    Susan V Smith
    Replied 6 months ago
    Great article! So happy for people that have found their way to financial freedom! We are just starting out and really appreciate people like you who share your stories and expertise. I would love a copy of your software. Saw a reference to it in another investment book as well and it is highly recommended. Thank you, and wishing you many more successful deals!