I thought I would post a few comments on this subject because so many investors have trouble with this subject. The reason in most cases that this is a difficult topic is mostly for 3 main reasons
1. Lack of confidence:
New investors and too gun shy asking others for money. Lack of confidence. I used to feel that way when I started investing. The reason was because I looked at it as asking for money not presenting an opportunity to invest in your deal. Now with over 760 flips and cash flow deal over the last 7 years it seems so silly but at that point it used to be scary.
2. Not enough research and data: Talk about how you cover the downside rather than just the huge returns.
Most investors tend to present how great the returns on their deal. Personally I feel that if you talk about all the research, study and data. Plus the mistakes and success of others that you have studied to build your investment system people will see your thoroughness. People with money worry more about risk rather than just returns. If you talk about how you cover your down side more than all the money you will make per deal you will attract long term stable investors that want a fair return that people who are just chasing ridiculous returns.
3. Greed & Fairness: When a lot of investors are getting started in my experience they ask for too big a piece of the pie. If I look back at my personal deals some of the earlier deals seem comical because I gave away huge pieces in the deal even though I did all the work. Today it seem funny but it helped me attract a core group of supports and investors. It's okay in the beginning to be a bit more generous. As you grow you get to dictate the terms. The only bad part is that some people will become used to huge returns and as you start bringing your numbers down they will not understand that why now you want to keep more. It's okay in most cases. As you grow and with more experience you will have more and more people willing to join your deal. In the beginning you have to learn to serve to be the king later.
Now let's talk about places to find money.
First off are you looking for
a. Short Term Money (A few days to a year or less)
b. Long Term Money (2 years to fixed 30 year term)
c. Partners (Debt Vs. Equity Partners)
Places to find money
1. Big Bank (Chase, Wells Fargo Etc. ) Have limited options for most investors.
2. Small Banks - One Of The Best Kept Secrets In Real Estate (My Personal Favorite)
3. Independent Mortgage Brokers - Worth their weight in gold if they know what they are doing can be a huge ally to help you grow. (I am talking about folk that have a lot of relationship and are not tied down to just one bank. Specially a good commercial mortgage broker with a lot of experience can be great.)
4. Private Money & Angel Investors - My personal Favorite
5. Hard Money Lenders - Can be useful but not my personal choice rate and rates are way too high
6. Crowd Funding - A fairly sophisticated way of finding money but the ultimate growth tool. (May require SEC filing so get proper advice from a SEC attorney)
@Andrew Holmes Great post... I think you are right with the first point and lack of confidence... There is an abundance of money in this world and with a little salesmanship anyone can get their share. Thanks for the post
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