Im a buy and hold real estate investor in the Kansas Cit metro who has consistent deals and private money coming into my business. Im working on expanding my operation to grow quicker but the cog that keeps me at my current pace, like so many of us, is finding more private investors.
Networking has been the most successful way to attract more private investors so I am looking for ways to increase the speed at witch I network with people who are likely candidates to invest with me.
Here was my idea: Creating a flyer titled "Interested in Real Estate? Lunch on Me." The flyer then lists my qualifications and lets them know to contact me if they want to learn more about real estate.
My intent is not to pitch these people when I first meet them, but to just find out their goals find out what they are interested in and help educate them in any way I can. If I think I can continue to help them in the future or if I think my company can offer a mutually beneficial situation I will then offer a follow meeting.
I feel a free lunch can be a very enticing offer to many people, but I really have no idea if this will work, any thoughts on the idea would be great.
Where I am really stuck though is how and where to get these flyers out to people. Anything like this is a numbers game, but I just have no clue how to get these flyers into the hands of the people who need to see them in a high quantity.
I feel this is a good general discussion but here are few more notes that are specific to my situation and the type of partners I can eventually network with:
- We are looking primarily for debt investors usually at 9% interest only.
- Minimum amount for a deal is usually $35,000 up to $80,000. On rare occasion it could be more or less.
- An investor can do as many deals with us as they have money for typically, it can just take a bit of time to find the deals.
- We usually hold the money for 1.5-2 years then refinance with traditional lending and pay the investor back. Normally when this happens the investor then lends the money back to us for a new deal.
- We are very active in the real estate market thus finding anybody else from wholesalers to quality vendors would be beneficial to our company.
Please let me know your feedback.
"I feel a free lunch can be a very enticing offer to many people,"
@Phillip Syrios , you are probably correct. A free lunch can be a very enticing offer to many people but those who have $35K-$80K and the inclination to invest in real estate have no difficulty buying their own lunch. Private money is a relationship business. Let people know what you do. Share your great deals and some of those that were not so great. When people show interest let them know there may be opportunities to participate in your success. Then when you get a great deal contact those who showed interest. It takes time but you may find that there will be investors contacting you before too long. I am not saying that taking someone to lunch can't be a part of your plan but understand that is just an introduction.
This sounds exactly what I've been mulling around in my head as my next phase to building my rental business!
So far I'm at 28 units and most of them have been purchased using land contracts and then later refinancing with a local bank. I'm in the process of refinancing 5 duplexes on contracts now into a single new commercial blanket loan right now and should close in the next 2 weeks.
What I'm hoping to accomplish next is have one of the 3 sellers I'm paying off with the refinance lend me $40-50k as a blanket 2nd mortgage on these 5 duplexes. I'm shooting to have the money for 4-5 years at 7-9% interest with interest-only monthly payments. I'd take that money and purchase, rehab and rent a foreclosure/distressed property and then find another private money lender to lend me what I have in that deal as a new 1st mortgage. Then I'd have my original investors capital back to rinse and repeat.
Hopefully I can do 5-6 of these deals in 6-12 months and after holding the properties for 12-18 months I'd take them to my bank as a package for permanent financing.
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Most investors want to know how safe their funds is when they invest with you and how much skin you will have in each deal.
90% of my private money has come from one place -- this forum.
I've found -- and I know others have as well -- that building credibility among others in the business is the best path to finding lenders, and if you want to find others in the business, this is a great place to do it (thanks to Josh and Brandon, there are about 180,000 of us now :).
I've borrowed money from people here who have never met me in person. I've loaned money to people here who I've never met in person. I've partnered with other BP folks on dozens of deals. I've mentored people from here. And I've learned much of what I know from people here.
So, my recommendation is to spend time here on BP. Contribute your knowledge. Help others who need help. Learn from others who are experts in other fields. And what you'll find is that, with the credibility and relationships you build, will come opportunities for deals, money and partners.
There was a recent thread related to this, might search a bit on the topic.
No! No flyers!
Ask the ones who already invest with you for others they know. Consider letting them in on a deal with new investors. Let them know that a new investor will not be taking away their opportunity to invest with you.
If you aren't a financial advisor, broker or attorney I suggest you not get into seminars much less speak in terms of % offerings. Become familiar with SEC requirements.
If you have money to "advertise" for money you should have enough money to spend 30 minutes with your attorney! :)
I agree with J Scott, you have to build relationships. Investing money with someone requires a great deal of trust and due diligence, and building your reputation, brand, and network are the keys.
Another thought - I recently saw a car driven by an investor here in LA that had advertising on it for his business. Along with his business info, it said something like, "if you're not earning 10% on your money, ask me how". I'm not sure if it's at all effective, and I'm certainly not speaking to the legality of anything here (do always consult an attorney), but I found it interesting.
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Here in Dallas a lot of investors meet at the Spring-creek BBQ, and they hand out flyers on what they do and looking for, and I have never seen an SEC agent hiding behind a stack of ribs ready to say hands in the air.
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Please follow the rules but there is no harm when you are talking to investors say I have heard people raising private money I always wonder how that would work.
If you think it wont be effective for some reason please let me know why.
@Jeff Rabinowitz I see this plan 100% as a means to an introduction and nothing more. My hope is that it is a way to increase my network with new people in new social circles. Do you see this as a waste of time and energy or do you think there is a possibility of creating new contacts (that may or may not lend to me) through this method?
@Brandon Hicks That sounds very close to what our business model has been but with a slight twist to it. The brilliance in my opinion is having private lenders who don't want their money back, but finding ways to recycle that money into traditional financing so you can use those private funds to start your next deal. PM me if you have any tricks you can teach me or troubles you are having with this model.
@Joe Gore I don't see that coming until much later after meeting with them more than once. If they really are interested in loaning to us then we would have some long talks about what investing in our business really entails. I am very confident in the product we offer so as long as it meets their financial goals I have no question we could make something happen. Before I have a chance to pitch them I need to know them, do you think this idea has any hope in getting me to that point, or what should I change about it?
@J Scott I have to agree with you that it seems like a great way to network, and credibility, trust and relationship are what raise private money. I don't think you could be more spot on about and Im getting more involved on BP to try and do just that, but with raising capital being the choke point in our company I am looking to find as many ways to network as possible. This idea is just one way for me to try and find new people who it makes sense to network with (wether they invest in our company or not.) Do you think it has any possibility of helping me create new networking leads?
Originally posted by @Mirinda Lowe:
Investing money with someone requires a great deal of trust and due diligence, and building your reputation, brand, and network are the keys.
This is so spot on! This plan is to just help get me to the introduction stage, not close any deals. The rest has to come from getting to know the person and their goals. Do you think there plan could work in doing that? Also I like the car idea as generating leads (much like a contractor would use!) but it seems very borderline with SEC regulations which I want to be on the correct side of at all times. Anything else you have tried/heard of that can help with an introduction and increase your personal network with the right kinds of people?
You will have people posting about the SEC regulations when they don't know what they are talking about. See a lawyer and let them tell you if you are in violation.
This is not directed at you Nick, but to the hundreds who keep posting about how to find money people.
Those with money do not devote any attention, not even seconds, to flyers for investment decisions. I certainly don't and I can't even imagine anyone I know of who would, not in my wildest imagination. A flyer has as much sophistication as an invitation to an ice cream social at a church, or a donation to the school sports program for a car wash.
The letters I receive inviting me to investment seminars from estate planners and investment brokers are on stationary, not copy paper, much less some garbage colored letter. They are written to me, personally. The good ones mention others I know as being invited, they did some due diligence in and about me. Sometimes they are follow up letters from my meeting them at civic or social events. I want to letters after someone's name, CPA, CLU, CFP, Attorney, I'm not sitting through some insurance agent's whizbang seminar or some real estate agent. I have knowingly gone to guru stuff for the fun of it, no intention at all to do anything regardless of what they claim. Dinner is provided, beef wellington, prime rib, steak, it's never for lunch, never! What did you have in mind, Pizza Inn, Golden Corral, Wendy's or just the Black Kettle Café greasy spoon?
A flyer or canned letter not only shows an extreme lack of sophistication in approaching a wealthy individual it's almost insulting. Try a silver cup on a sidewalk and wear a sign. The level of professionalism is about the same.
Folks with money also know what an accredited investor is, most get an ear full from financial advisors, they already know more about SEC regulations than 90% of the operators on here searching for private money from completing investment applications, having certified financial statements and letters from CPAs. .
You people don't do your homework. It shows laziness and ignorance, like most under 35, you want it the easy way upon demand, least amount of effort possible. That lack of effort, knowledge and sophistication only magnifies the naïve financial immaturity.
There are hundreds of threads about finding private money.
No one with real money, who is not familiar with real estate answers goofy letters soliciting money. Who is impressed enough with some letter from a self proclaimed expert..(?)....unsophisticated investor types with limited investment alternatives. Probably greedy ones who may know more than you do. If they don't know more than you, you better be walk on glass taking their money, taking granny's money, her savings and screwing up will land you in the slammer! All the better reason to only work with an accredited investor who is financially sophisticated, you might catch flak for losing their money but they will be seen in a much different light than granny.
Mentioned above is how you find money people. Referrals from happy investors that you have had success with.
How to find the first real money investor? Through social networking!!!!!!!!!!
You meet them socially (might be professionally, but you will still need social interaction), you impress with knowledge, your deals done, your accomplishments. You knock them over with your integrity, your truthfulness in other areas, let them get to know you and get a feel for who you are.
Do not ask for money, make them ask you for the opportunity to help you. If they see you're doing well, they see that you are honest, forthright, responsible then they will ask you.
This takes time. There is no freaking short cut! If anyone says there is, they are selling you some stuff and lying. It can take months or even years, but after that ball begins rolling, then things will happen.
Frankly, if you can't carry yourself very well in social circles then you're going to be pretty well stuck at what ever your social rung on the ladder will be. Either learn and improve yourself or be happy where you are.
Besides going afoul of SEC laws, advertising (begging) for money, you'll seem despite too. You don't tell someone what you'll pay in this circumstance, they will tell you, hard money lenders, here they come! We all know the Golden Rule, he who has the gold makes the rules!
I do deals at 10%, turning it over to some straw man, minimum of 14% and I have to watch the deal and the straw man, almost twice as involved. Consider the tax bracket of larger investors, you offering 10% isn't worth finding out what you're up to, 18 or 20% yield in a deal might catch some attention. 10% is for small lenders acting on their own.
It's Memorial Day, I'm telling you like I would my kids or my troops in a realistic "get this in your head" talk. I'm being polite actually, most need a slap of reality in their face and they have never been around money so they have no clue, now you have a clue. Fear not, it probably won't be two weeks before someone else asks a similar question. Good luck. :)
I think the odds that a flyer will attract an investor are extremely low. You will probably get many to take you up on your offer of "free lunch" but I would think that the odds that those you invite will become investors (or even have the means to become investors) are extremely low. Frankly, I think you are more likely to turn off most potential investors with your flyer than to attract them.
Strike up a conversation and continue it over a series of meetings or other correspondence. Develop the relationship, build your expertise and share that expertise. When investors contact you you will know they are ready to invest.
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