How To Really Find a Money Partner (When You Are New to REI)

7 Replies

I've been reading a lot of posts lately that follow this format - "I am just getting into real estate. I have no experience, but I've been reading a lot and listening to the podcasts. I don't have money to get into it myself, but I am looking for a money partner."

What?

Wait, don't freak out. I am trying to tell you how to make this post up there better. It's ok to be new and to want to use someone else's money, but if you don't have a value proposition on your end, why would someone give you money? A bank or a private lender or a hard money lender will give you money for a trade-off of a high interest rate and collateral in the property, but most people are asking for someone to partner with them without giving any background as to what they (the asker) bring to the table in the deal.

What skills do you have that can help an investor out and develop a relationship that could end up in some form of a partnership down the line? Do you have property management experience? Do you have a construction background? Do you have specialized work experience like plumbing, electrical, etc.? Do you have a real estate-adjacent profession like attorney, accountant? If none of those, what is your hustle worth? What are you willing to do? Will you bird dog? Will you analyze 15 properties a day? Will you get your RE license and be an investor's main showing agent, any time they want to see an REO on the market? How many REI events are you going to each month (pre-COVID)?

I know it's attractive, these forums and the thought of becoming an investor, but when you come into a pool of very experienced real estate investors and just say, "Hey everyone. Anyone want to invest with me?" and you give no real reasons to invest with you, other than you really like real estate, that's not a value add for a money partner and you are just wading in the small pool. Do you know how to find deals? Will you invest whatever limited capital you have into finding deals? Investors want deals and returns and value. What is your value proposition?

There have been a lot of posts that follow that format and I agree with adding value. I think for the folks that don't have any of the specialized skills mentioned the path of least resistance is to actually save for your own down payment rather than spin your wheels looking for a partner. High disparity equity partnerships are quote rare (one partner owns 95% the other 5%) I think these type of posts also make it seem more common than it is.

@Aaron K. I couldn't agree more. I actually don't think it's wise to try to bring in a money partner when the disparity is so great, as you said. I wrote the post because I see so many people asking how, but not thinking that the way to build a partnership is through mutual value and relationship building. Great point. If I am giving advice, I always say stop trying to find a partner to fund you and save and learn and see what relationships you can make. Often a small partnership can happen for a small piece way before someone just putting money on the table for a new investor to use indiscriminately.

@Jonathan Greene I could not agree more.  I was once in that position and it was not until I learned what a good deal was and was able to present the numbers to others did I find someone that trusted me to start. 

And that is one thing I think people do wrong, instead of focusing on people who trust them already, they instead try to find someone who has 0 trust for you, you are making it more difficult. Work with people that know your character first! Build your reputation and confidence and move from there.

@Antonio Cucciniello that's a great point. Why start by trying to get money from a stranger? Try partnering with a parent or cousin or aunt or uncle by showing them what you know, if they are interested and have some money to invest. I also think they want too much, too soon. If you have no savings, why is someone giving you a pile of money? Save enough to take a small part of a deal with someone and then earn more with sweat equity.

@David R Coleman I would think it would be safer to just do a 203k loan instead of standard to cover renovation or another renovation loan package than to just have someone fund the reno. It can be done, but it should only be a strict return on money because if not, they will want more say over the renovation and that is where all the problems start even when people say they are silent investors, they rarely are.

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