How to raise $50,000k by year end?

Question

Joel Owens · Answer

You need to know what type of investor you are talking to. I generally run across 3 types.

1. They need the investment to immediately generate cash today.

2. They need the investment to generate some cash today but can be nominal and get more equity on the back end.

3. They do not need the cash at all today but know when the property is turned around or the new development is complete the cash flow will start coming in plus a really nice return on equity for the back end.

David Thompson · Answer

Hi Abou,

I can address a few of your questions re-listing them here:

Questions:

1, 3 and 4) see attorney who specializes in real estate formations / understands SEC rules so you don't run afoul there.

2. How do I raise initial capital from them?  Tips in link below are some lessons I learned in my capital raise. Some of these may apply to small raises.

https://www.biggerpockets.com/forums/432/topics/30...

5. How much equity/return should I return? I think 10% cash on cash gets most investors interested.  Also, most investors don't want a buy n hold forever strategy, they would prefer having a clear exit strategy, i.e plan to hold / sell in 5 years especially if you are doing value add plays not just buying cash flow.  Total all end return projection to double money in 5 years (cash flow + profit at sale).

6. Should I have a deal on the hook prior to initial conversation?  My thoughts on this would be to have a general investment theme put together / business plan and having a conversations but no specific deal to offer because you definitely want to ensure you are not running afoul of investment regulations / securities promotion / solicitation.   Discuss this w/the attorney as well.

Ellis San Jose · Answer

I'm not an attorney so please consult with one before you make important decisions.

Why not secure your investors by either a deed of trust or simply have 1 investor not 10 with $50k have title.  You work for your sweat equity and income by finding a lucrative deal and bringing it to the finish line.

George P. · Answer

do u have a 401k vested. and worth over 50k? pull a 50k loan out of it.

u are welcome.

Jonathan Towell · Answer

Disclaimer: I'm not an attorney. :)

1. Protect their interest by aligning incentives. For example, make sure they get paid before you get paid.

2. Raise capital by building trust and having a solid plan.

3. Legal structure will depend on the debt, the investor's desires, and tax issues.

4. How to structure the deal will depend on the returns, the debt, taxes, etc.

5. You should return all the equity plus at least a market return for the asset type.

6. You should network before you have a deal so that you begin building trust and getting your story out there. You need to have a deal in place before you ask for capital.

A few more thoughts:

1. I wouldn't raise $50k from 5 people. I'd raise it from 1. The more investors in a deal, the more complicated it will be.

2. We shoot for 10% cash-on-cash and an exit that will double the investor's capital.

I hope that helps.

Matt M. · Answer

You really should hire an attorney at this point and talk to him/her.

How to raise $50,000k by year end?

Most Popular Reply