It's hard to ask for money
Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votesIt's hard to ask for money
Most Popular Reply
Lender · Woodland Hills, CA · Member since 2013 · 364 posts · 115 votes
13y
Originally posted by Dawn Anastasi:
Asking for money seems to be an embarrassing topic. It seems to be more embarrassing to ask for money from private individuals than from a bank.
So my question is, how do you "get over" the embarrassment in asking for money when you know you have a good deal to present?
Dear Dawn, embarrassment is unnecessary. Take into your heart, "if the deal is good enough, the money will find you."
Bring a smokin' deal to a REIA, and folks will line up to dance with you.
Heck, bring it to me, I will not only fund you, I will offer piggy back rides and mani/pedis.
Walk boldly folks, and hold hands!
Tevis
30 Replies
- San Antonio, TX · Member since 2013 · 65 posts · 13 votes13y
Remember you're not really just asking for money... YOU'RE OFFERING THEM THE OPPORTUNITY TO MAKE MONEY. Make them feel special because you've chosen them over others.
I'm not considered a real investor yet since I haven't closed on my first flip, but I do think that you can't just ask anybody for money. Ask people who trust you and know you good but also, it might be a good idea to show them your numbers. Without being too explicit, show them your plan, and why it is such a good idea for them to invest in you. Another thing is be willing and be generous by compensating those who trusted you, offering an incentive might help you get started. IDK, just my thoughts.
- Lender · Woodland Hills, CA · Member since 2013 · 364 posts · 115 votes13y
Originally posted by Dawn Anastasi:
Asking for money seems to be an embarrassing topic. It seems to be more embarrassing to ask for money from private individuals than from a bank.So my question is, how do you "get over" the embarrassment in asking for money when you know you have a good deal to present?
Dear Dawn, embarrassment is unnecessary. Take into your heart, "if the deal is good enough, the money will find you."
Bring a smokin' deal to a REIA, and folks will line up to dance with you.
Heck, bring it to me, I will not only fund you, I will offer piggy back rides and mani/pedis.
Walk boldly folks, and hold hands!
Tevis
- Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes13y
@Tevis Verrett never had a mani pedi so do not know what those are like. cannot imagine they feel better than a good real estate deal ...
- Specialist · Westlake Village, CA · Member since 2010 · 1k+ posts · 781 votes13y
If you don't ask the answer is automatically "No".
- Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes13y
Originally posted by Tevis Verrett:
Heck, bring it to me, I will not only fund you, I will offer piggy back rides and mani/pedis.
Tevis
I know where my next wholesale deal is going!!
I agree with whomever posted up above me. (They removed the original posts preview that appeared down below so I don't remember who it was. Sorry!)
How can someone be embarrassed about presenting an opportunity to someone else? You should be excited about it. Enough so that they get excited about it. Begging is for bums down by the stoplight at the strip mall downtown. You don't think of your real estate opportunities the same as the cardboard signs they hold do you?
- Charlottesville, VA · Member since 2013 · 15 posts · 0 votes13y
I like this question, Dawn. I haven't found people to ask money from yet except for my family and hard money lenders I've found on the internet. I plan to attend real estate investors meetings soon so maybe I will have more experience later. When I ask people I am comfortable with (which currently only includes my mom or possibly other family) or a hard lender I agree that I focused on the selling point that it is a good opportunity for them to also make some money. I am interested in what others have to say about this. I find it interesting that so far the people responding have basically said "just don't think about it". Yes, that is great end goal best advice (and also a difference in personalities). For those that need steps to get there, what do you do?
(By the way I really liked your interview and your information about peer to peer lending sites!)
- Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes13y
If I am excited about the deal, it doesn't mean that others would be. When I was talking about my real estate activities to a group before, I was touting how successful I've been in a short period of time. Then one guy in the group was saying how real estate is not sustainable, and that things go downhill quickly, yada yada. It bummed out the conversation really quickly.
Another person I spoke to said that he gets double digit returns on his mutual funds and that is what he is going to stick to.
Everyone else I talk to thinks its nice, but doesn't have money of their own to invest.
I feel like I'm talking to the wrong groups of people.
- Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes13y
@Carrie Pledger thanks so much for listening to the podcast!
- Rental Property Investor · Holley, NY · Member since 2011 · 507 posts · 347 votes13y
@Dawn Anastasi - outstanding question. I am going to read between the lines a little if I may. I grew up in a family that worked very hard for every dollar and respected every penny. Instead of being born with a "silver" spoon in my mouth, I would be more accurately described as being born with a plastic "spork" in my mouth! I am also, by nature, introverted. These 2 factors have also made it very difficult for me to get the courage to ask people to borrow money.
I CAN say, that it is getting easier as I successfully complete more and more deals. My family "expected" me to fail, though they never came right out and said it, in the beginning. Actually, I honestly think that only RECENTLY they started to think that maybe I knew what I was doing. My thought is that their change of heart was based on me starting to openly discuss doing investing full-time and selling off my business because my investments made me more money and required far less time/attention/stress than the business.
Back to my point, I think that the best way to overcome these feelings is to keep asking. It is another one of those things that you get better at the more you do it. That is not to say it will get EASIER for quite a while, but it will also get easier with time. If you are introverted like me, then this will be a challenge every time. However, be good at what you do and make sure your numbers are real and make sense, so you can ask with confidence in the underlying deal.
It still freaks me out a little bit when I find a deal I want to go after and I pick up the phone to ask somebody to borrow $ 50,000 (or more). The call is usually only a few minutes long, followed up by an email with a quick napkin analysis of the deal and some digital pictures. It typically ends with an "ok, let's go for it". I am also starting to find that as I do more deals successfully, I have people just now starting to ask me if I need any money to do deals. That is weird too.
I pay a premium for the money I borrow, sometimes points and a high percentage interest rate. This is business and I treat it that way. I no longer pursue deals if either myself or my wife/business partner are uneasy about. We go after "no brainer" deals. We don't want to fail. We have failed before and know what it feels like and never want to repeat our mistakes.
That is a very long-winded response. To summarize, I would say that you will need to work outside of your comfort zone for a while. You will feel uneasy, embarrassed, shy, scared and probably more, but keep doing it. It will get easier. Don't let a "no" deter you from asking again at a later time on another deal. Find out what the "no" was based on. Was it the particular deal? Was it that they just tied up some money in something else and need to wait for it to come back? This helps to build your relationship with your lenders (private) that lend based on the deal and relationship more so than your application score. By continuing to interact with them, even if the answer is no, you still get an opportunity to show them how you operate and it allows them to gain more confidence in you.
- Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes13y
Originally posted by Dawn Anastasi: If I am excited about the deal, it doesn't mean that others would be. When I was talking about my real estate activities to a group before, I was touting how successful I've been in a short period of time. Then one guy in the group was saying how real estate is not sustainable, and that things go downhill quickly, yada yada. It bummed out the conversation really quickly.
Another person I spoke to said that he gets double digit returns on his mutual funds and that is what he is going to stick to.
Everyone else I talk to thinks its nice, but doesn't have money of their own to invest.
I feel like I'm talking to the wrong groups of people.
That is perfect right there, now you know what road blocks you need to prepare for when you ask. I know you were trying to find out how to ask and whom, but just as importantly when you do if you get shot down every time who cares if you ask 10,000 people.
So to Mr. Unsustainable, your response can be:
You're right RE like all investments goes through cycles, we recently are coming out of a negative cycle right now. That makes this one of the most secure times for RE since chances are prices will continue to trend positively for several years still. (this next part depends on if you're flipping or buy and holding)
(Flipping) I'll be completing the rehab withing 6 mo so your investment period is short allowing repositioning and re-evaluating the market if it begins to trend negatively, this minimizes the chance of getting caught with an upside down loan.
(buy and hold) The properties I buy will cash flow from day one of being placed in service, since they will have tenants that pay $750/mo and the loan payment will be $300/mo even if RE values go down my properties will still be able to continue to pay the loans owed so your investment is secure and I am unconcerned with values because I'm holding properties long term so a sale is not required.
To Mr. Mutual fund:
That is great, so maybe this opportunity isn't right for you right now but if your returns change or you know others that would like to invest I'd like to explain everything so you have an idea of what I do. I know stock markets can change quickly like they did in late 2008 and people lost a lot of value in their mutual fund investments. RE lending is more secure for you because (go into the same thing up above) so even if RE prices go down your investment is more secure because I can continue to pay.
To Mr. No funds:
I understand, but could I just kind of practice on you I'm still getting used to doing this and want to get your feedback on my approach. And maybe one day you will be in a position to lend or know someone who could and this way you'll already have an idea of what I'm doing.
Take all of that for what it's worth. I myself haven't received private funds to work with yet. I have asked a few times nut no takers. Many I know in my age group (25) don't have any money to do anything with, and those that are older and do have money I don't know well enough yet to get money from. I do know 1 or 2 people that are very wealthy but haven't quite got where they wanted to invest, one I asked said "I don't want to do anything else with tenants right now". I just wanted a lender not a partner and I was going to take out his loan within 12mo but he was not wanting the tenant hassle he perceived. So I just keep mentioning RE around him and his daughter and leave it at that and I'll let him come to me if he realizes he would like the return
- Developer · Cleveland / Akron, OH · Member since 2008 · 922 posts · 399 votes13y
I have not yet looked for private money, but I can understand why one would feel embarrassed. But, that is in your mind, so you can control that easily through confidence.
You are not asking for money, like asking for a raise or allowance or a favor etc. You are offering an opportunity that you control. You have the power, not them. If they don't take it, someone else will. Focus on the fact that you are offering the chance for them to make this return. You are doing them the favor, not the other way around.
- 13yJean BolgerPro MemberAurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
Originally posted by Dawn Anastasi:
@Tevis Verrett never had a mani pedi so do not know what those are like. cannot imagine they feel better than a good real estate deal ...LOL- you just made me spit my coffee
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes13y
"If I am excited about the deal, it doesn't mean that others would be. When I was talking about my real estate activities to a group before, I was touting how successful I've been in a short period of time. Then one guy in the group was saying how real estate is not sustainable, and that things go downhill quickly, yada yada. It bummed out the conversation really quickly.
Another person I spoke to said that he gets double digit returns on his mutual funds and that is what he is going to stick to.
Everyone else I talk to thinks its nice, but doesn't have money of their own to invest.
I feel like I'm talking to the wrong groups of people."
Dawn not everyone will be the right fit for what you are doing. You only need ONE for that particular deal.
Everyone has fears about certain things. Rejection in any form is not a fun experience.
I get calls all the time from investors for commercial real estate. Some own stocks and others have money in other things. After talking with them some are excited about real estate and others decide after a fact finding mission to do other things. What makes sense for some others see too much risk, not enough return, money tied up for too long, not enough tax advantages etc. Keep finding solid deals out there and the buyers will find you.
What is your current deal you were wanting the investors to bite on??
- CA · Member since 2011 · 762 posts · 182 votes13y
Not sure why there is a disconnect. I think it's because ordinary people with money got there by not being stupid with there money and if they are not familiar with RE investing they naturally shy away. Hmmmm, maybe there needs to be a new kind of meetup ... "The Private Money Rountable", a place where (RE) investors and (PM) investors connect. Not a traditional REIA (there is no shortage of those in SoCal) but more of a clearing house style meetup where borrowers and lenders meet for the one specific purpose.
Actually, the more I think about it the more I can see a lot of folks getting burned, both borrowers and lenders. PM lenders burnt investing in bad deals because they didn't know better, and borrowers doing deals they shouldn't because they now have money for deals that don't really pencil.
PM lending is far from risk free and people that have worked hard for their money naturally know this, where sometimes I'm not sure re investors do.
There ... I came up with a good idea and talked myself out of it.
But I would like to explore that mani/pedi idea more.
- Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes13y
@Joel Owens the appropriate place to post about a deal is the bigger pockets marketplace but the short answer is a two percent rule single family property.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes13y
Hey Dawn,
I think you might have misunderstood my reply.
I do not do anything residential. Marty Boardman and J Scott do business up in Milwaukee. You might want to run the opportunity across their desk even if they do not want to invest they have many connections that might.
By your post it was hard to understand if you are actually trying to obtain financing for a property you have interest in or you were at a local investor meeting just telling them about the deals you have done and the reception was lukewarm.
- Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes13y
@Joel Owens I may have indeed misunderstood you. No, this wasn't at the REIA; this was a conversation with friends of friends as I do talk about my real estate activities. The guy that invests in mutual funds threw out the term "slumlord" and I have to admit I got a little defensive and put off.
Just because you can buy properties for cheap (like the $20-$30k I spoke about) doesn't mean you're a "slumlord" but I think there is the impression there.
- Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes13y
@Dawn Anastasi from our very own BP blog.
http://www.biggerpockets.com/renewsblog/2013/05/20/slumlord/
Maybe that will help you prepare for next time you're in the conversation.
- 13yDaniel DietzPro MemberRental Property Investor · Reedsburg, WI · Member since 2011 · 1k+ posts · 857 votes
Dawn and all,
Great discussion going on here.
I am in the midst of my first property purchase of a buy and hold that I am doing as a 3-way LLC with family members, all using our IRA monies with no borrowing due to not being able to find a non recourse lender for this particular property (age, price, etc)
It has become apparent that to grow our real estate business to 'the next level' we will need to find Private Money to leverage our IRA assets. So even though that is a bit ahead time-wise, I have already started to form a plan of action.
I my case, I am 'somewhat comfortable' dealing with large sums of money, as my day job is in the construction industry, and I am often selling jobs for 10K-100K and dealing with large sums, as in "I need a 30K deposit to get things rolling on this job" etc.... I also have an excellent business reputation and character reputation in my area, and am involved with a lot of civic activities etc...
With that said, it is still a different thing selling someone on the idea of 'buying a return' instead of a hard product.
One of the things I have done is to make a list of about 200 'potential lenders'. This will obviously be different for all of us depending on the stages of our lives and the people we know. My list is made of of; family members far and near, friends, business associates, acquaintances (UPS man who I have chatted with for 10+ years and know he is sick of stocks for his IRA and wants to find something better than CDs) church friends, a LOT of former customers (I have had the advantage of knowing a lot about their finances while working with them....such as "we have our other house paid for, are selling it, going to build this one and still have 300K left over" etc...).
So, I have been working on this list, and my next step is to approach about a half dozen of them, NOT to say 'do you want to do this' but to say "here is my idea, here are my figures, etc.... and I just want a *general thought* of what you think of this; does it sound logical, well planned out, etc..... to find out what possible objections will be.
I am still thinking about *which* people to test the idea on. I want a good mix. So far I am thinking; a retired farmer (money in CDs), retired business man that had lots of real estate in his younger years (familiar with rentals) widow who has a large estate and does not like the volatility of stocks, retired customer who sold business and has large sums and I would assume is looking for diversity etc...
I guess my thought is: come up with a plan, get over the hesitation how ever you need to do it (I hate the 'selling side' of busienss, I want to 'create') work that plan one step at a time, and educate yourself as much as possible.
Dan Dietz
- Flipper/Rehabber · St. Louis, MO · Member since 2008 · 489 posts · 300 votes13y
@Dawn Anastasi Yes, asking for money is difficult. I, myself have no desire to do it at this time, because I have no track record to show. The last thing I want to do is ask someone for money and then loose said money. I am fine with trying it out with my own, but not with others, not now.
I think some people had some great responses on HOW to get over asking & you have proved yourself to be successful at what you do. And you should be proud of what you have accomplished. I think you have inspired many through the podcast on how to buy homes inexpensively and turn them into successful buy & holds.
Many people don't understand REI, they just know what they see on TV or they see it as a HUGE risk. And while you can educate, many won't listen, because they pay too much attention to the news or they feel safe with what they have. Also you know you are the farthest thing from a "slumlord" . Some people are just ignorant & I would just ignore those types of comments.YOU, my friend, are doing a great job with your REI & YOU will be the one who is the millionaire next door. So don't let the naysayers get you down. Keep your head up & keep doing what your doing!
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes13y
Originally posted by Dawn Anastasi:
Asking for money seems to be an embarrassing topic. It seems to be more embarrassing to ask for money from private individuals than from a bank. Why? I think because a bank is just an "institution" versus a person (although that sounds strange, because institutions have people in them). Asking a person is more personal, more one-on-one.
It's been repeated on the forums a number of times to ask friends and family. But if you grew up without money, I think asking for money is even harder because it feels like "begging" and being successful is supposed to mean doing things yourself. Also, if you grew up around people without money, but have risen above, those friends and family you know might not have money to ask for.
So my question is, how do you "get over" the embarrassment in asking for money when you know you have a good deal to present?
Asking a lender for money is a business request, they aren't doing you any favors, they are making money on the deal or they don't do it.
Need to approach individuals in the same manner, you're not asking a favor you are inviting them into an opportunity.
If you have been successful, the opportunity should be viewed as a legitimate business opportunity.
There should be no embarrassment if you are offering a good deal.
It's not hard to present a business deal. It's hard to beg, which is what you do without confidence in the deal but not really hard to ask, as it is to accept rejection and feeling guilty for putting someone in a position to have to say no.
Make it clear that 1. It's all business and you feel it's an opportunity. 2. That there is nothing personal about it but you'd rather offer it to them than someone else. 3. Have your ducks in a row. 4. Show how they get a return of their money before they get a return on their money. 5. Make them secured, if all fails they still get their money back. 6. Draw it up in writing so there is no misunderstanding later on. 7. Secure them just as you would any other lender. 8. Do what you said you'd do. 9. Keep them informed as you would any business partner. 10. Pay them off as promised!
Good luck... :)
- Investor · ATL-MOB-DFW-STL-IND, AL · Member since 2011 · 87 posts · 13 votes13y
@Dawn Anastasi you ask the question: "Who is the RIGHT group to talk to about private money?" My mentor's reply to that same question is:
<<Whoever is pre-disposed to invest in real estate>>
In other words, we do not want anyone who does not believe in real estate, nor ever invested in it in the past, nor anyone who has to be sold to real estate. Who are they? Past real estate investors. Where do you find them? REI Clubs, 1031 Exchange groups, landlords, REI cash buyers , retiring apartment owners etc. Part of great marketing is pre-qualifying.
- Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes13y
I agree that this is one of the tougher aspects of the business.
There are a lot of negative perceptions that people will throw at you as a landlord they say is a slumlord or as a rehabber they think just covers up serious system and structural issues with new paint and nice fixtures.
I won't claim this is a strong area for me but I think you have to have the attitude that most have touted that you have to KNOW you are giving them a great opportunity and speak to it that way, even if you get a Debbie Downer trying to bring you down.
- Residential Agent And Investor · Scottsdale, AZ · Member since 2013 · 212 posts · 83 votes13y
I think @Matt Devincenzo was spot on when he talked about being prepared for these kinds of conversations by going over hypothetical questions/answers. People will obviously have concerns, and this is where preparation will pay off to help alleviate those people's fears.I would add that raising financing is all about selling your idea/investment. You are very passionate and knowledgeable about what you do - if you let that passion show through when you speak, things should become much easier. The rest is making the numbers very relevant and easy to understand - if you speak passionately about what you're doing and the numbers make sense, why wouldn't they do it?
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