I am super new in Real Estate but currently mid-way through Temple University's Real Estate Institute to obtain a sales license. Meanwhile, there is property I am considering buying now and flip. It is a diamond in the rough, located in a booming neighborhood with development going on everywhere! Ran the comps and there is extreme upside in ROI, thus I need to act fast! Spoke to seller, we've agreed on price, ready to go. I wanted to pitch to a few family members and friends who I think might be interested in investing. Is there a basic investor proposal or template I should follow? If I need to create my own what important elements should be included?
Thank you in advance for taking to time to advise and counsel!
Most people are interested in RE investing on some level. It is a sexy business! Try and bring up a little bit about what you are trying to do in casual conversation. If prompted, ask if they may know someone interested in earning more than peanuts on their money. Refine your 'elevator pitch' and be sort of reluctant to let 'em in. Tons of resources here on BP. Good luck!
@SteveVaughan I like the idea of being reluctant...kind of makes them curious to know more and then I can get into some details. Gracias!
These are friends and family that you are talking about. You don't want to come off scripted or like a sales pitch. Just talk to them. Hey as you know I've been attending _____ and had a deal just fall into my lap. The ROI is _________ if you know anyone interested let me know. Your goal here is a "well I might be! Tell me more". If not upgrade to a pro account and post the details here. If it truly is a great deal you'll have no problem finding the money.
Hi @RyanD thank you for your input!
@Moshay Laren congratulations on taking a decisive step forward. You should definitely access the investment calculators under the "analyze" tab. Print out your findings so you will have actual information to show people. You should also be very specific on who will be apart of your rehab team. Don't just say "I will find a contractor"... Let your investors know that you have already done the footwork and that you have guys who are ready to move forward. Make sure your comps are up to date and print those out, with a map, so that people can see the upside potential in your building. If your investors are not seasoned in this industry, I would have pictures of what the space looks like ALONG with pictures of what you want the space to look like after renovation.
Your biggest challenge will be to defend your "numbers". Those numbers could be from the "hard" costs of construction, to the "soft" costs of your finishes, to your projected ARV. Anything you can do to defend your numbers should take a priority in developing your pitch.
Remember, everybody gets lucky. But those who are prepared for luck are the ones that become successful!
@ArlenChou wow! Thank you so much for your detailed and informative response. I realize they are family and friends but we are talking about a pretty substantial amount of money so I definitely want to present it to them in a well-packaged manner so they will be assured I did my research and thought things through but ultimately on the return of their investment. This helps a lot! Thank you again.
@Moshay Laren you are very welcome. My person feeling on investments from family and friends is that it is MORE important to get your ducks in a row, then just a third party business partner. You will risk much more than money when you go to your inner circle. Family gatherings will suck if people feel like you lost their money or worse they think you stole their money!
I would suggest that once you get your packet together, pick some close BP friends and have them critique it for you. Maybe offer them lunch or drinks in return for their time. But try to get a seasoned eye to look at it and try to poke some holes in your plan. If you can get past an experienced investor, you will be able to answer almost anything your family and friends fire at you.
The only other thing I can recommend is that when you talk to them, make sure you are separating your personal relationship and your professional relationship, both internally and externally. If they say "no", don't take it personally and don't keep chasing them.
If you come off confident/knowledgeable and the deal makes financial sense you will probably get the funds you need to move forward!
Please report back and let us know how your deal goes.
Wow! Good advice @Arlen Chou
@TuanLe Tell me about it! !!!!! Lol
@arlenchou you are the bomb! Like Really! Ok so, can I buy you a drink or treat you to lunch by way of a gift card to take time out of your busy scheudle to overlook my proposal? Truth is, I haven't found a mentor in my area yet, but I'm looking. I'm so grateful to you guys here on BiggerPockets.
@Moshay Laren awesome that you found something and are taking action! Remember, one cardinal rule of real estate is that if it isn't in writing, it doesn't exist. Even if it is with family members (especially!). You need to make sure that you have a JV (Joint Venture) agreement or something similar in place outlining the responsibilities, the money into and profits for the deal, as well as any liability. I don't know if a typical JV agreement is here in BP, but if not, shoot me an e-mail and I'll hook you up with the one that I use.
You are a professional. We all need to maintain a professional relationship with everyone we partner with, especially friends and family. That is the only way to make sure that you are still friends at the end.
Personally I can't stand the term PITCH.
It just invokes in my mind a sleazy tactic to try to sell someone on something and talk them into doing it.
I like the term "present you an opportunity" better.
I think choice of words can have a bigger impact than people give them credit for.
@MarkMynhier - I echo your sentiments 100%! Thank you for offering a template. Look out for my email.
@JoelOwens - I agree! I like your choice of words better. Language is important! Thank you!
@Moshay Laren I appreciate the praise and I would be more than happy to take a look for you. But you really should try to find some guys in your area that can help you with the specifics of your market. Local guys will be able to really pinpoint problems with your ARV and renovation costs. You might be able to get some recommendations on GC's or supply houses. Look for local meet ups, I am sure that there must be some BP'ers in the Phili area. If there is not an unofficial BP meet up in your area, send out an invite and get some people together. This alone will help your business presentation if you can say you are a "regional REI meet up coordinator"!
I come from the tech world with exposure to start up companies and VC fund raising, so the details of raising money matter to me. You will be fine if the deal is solid and you can show your audience that the upside potential is much higher than the downside risk!
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