Where to find passive Investors

Question

I have recently started venturing into rentals and I am starting to find good off market apartment deals. What I am looking for at this point is to find passive investors to put money down on the deal that want to earn 10% on their money. I am having a little trouble not knowing where to begin looking for people who want to invest in real estate in this way. Any advice on where to find investors like this would be very much appreciated!

Annie Dickerson · Answer

One of the best places to get started with finding passive investors is to talk with friends and family. Share with them what you're doing in real estate, the opportunities you're looking at, and what you hope to achieve.

Through these conversations, you'll get a sense of the types of questions that people might ask about your opportunities and investing with you, so you'll get better at speaking to those things and addressing their questions and objections.

If you have friends and family interested, that is the best, as they already trust you, and trust is the most important thing when finding passive investors for your deals. As you gauge their interest and amount of capital they might want to invest, put together a sample deal package and walk them through it.

This will give you the opportunity to walk them through a hypothetical deal that looks similar to the type of deal you're looking for. The goal is to answer all their questions and address all their objections through the sample deal, so that by the time you share an actual deal with them, they'll be ready to invest.

For friends and family who are not interested in investing with you, ask if they know anyone who might be interested. Often, friends and family can be the best source of referrals.

Overall, it takes time to build up a strong base of passive investors, but it's very much worth it! Learning how to raise capital and leverage private money will allow you to scale your portfolio much more quickly than if you were only using your own capital.

Good luck!

Don Konipol · Answer

@Kyle Clabby   If I read your post correctly you’re trying to find investors who will lend you money for the down payment and are going to pay them 10%?  If this is correct you are way off base.  The investors would essentially be taking a second lien on a property with no equity and providing financing to a borrower with no down payment.  We lend money on deals￼ all day long and our investors get 12% interest with a first lien and with the borrower having a significant amount of his own cash invested.

When a deal is syndicated, the investors putting up the down pay,ent get 80- 100% of the ownership, a preferred return, and their investment returned when sold before the sponsor gets anything other than a management fee.

Further, when soliciting or engaging passive investors, you are selling a security.  You either have to register the offering with the SEC, or have an exemption from registration.  The way you do this not only has implications as per the legality, but also has implications for any defenses available to you should you be sued.  Most worrisome is the fact that “just doing it” would open up the sponsor to charges of fraud when ding sued; if found guilty of the fraud charges then bankruptcy would not be available to discharge the debt, and unless the sponsor enters a plan to pay the investors, his life is about to be different forever.  Financial fraud is a￼ disqualifier for many types of jobs.

Carl Fischer · Answer

@Kyle Clabby

The mid Atlantic Summit in Philly this week will have many BP capital raisers as well as lenders. Find the events that bring successful people together primarily for education and networking not the sellathon that a lot of groups put together.

Cameron Tope · Answer

@Kyle Clabby where have you looked?

A good place is local meetups and self-directed IRA get together's. Just make sure they are established and have done many deals in the past - the best private money lenders are those that come recommended through your network.

Best of luck!

Rita Medeiros · Answer

@Carl Fischer Agreed! Awesome event, I went last year & will be there tomorrow!

Kyle Clabby · Answer

@Cameron Tope I have just begun looking, thanks for the tips 🙏

Where to find passive Investors

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