When is the best time to attract private money??

Question

Hey everybody,

I have heard different things about whether people secure financing before or after they have found a property that meets their investing criteria. If you are working with private money, do you try to attract partners/investors before you have found a specific property... with a hypothetical situation per se? Or do you prefer to only ask for private money after a specific property has been found and you can show them the real numbers? After reading a lot of these posts, it seems that private money is mostly built upon relationships, experience, and a good reputation, do you investors keep a list of people that you could turn to if an opportunity presents itself? Should I also try to keep track of people I could turn to? What are your strategies?

Michael Quarles · Answer

1) at all times.  Everyone you know, no one you don't.

2) during purchase negotiation

3) at close of purchase.

Jeremy Cyrier · Answer

Network and build your list of potential money partners with a specific deal game plan to discuss.  When you have an "opportunity", contact your possible money partners and ask which one of them would like to participate.

And as a CYA, make sure you're following SEC guidelines.

Will Barnard · Answer

Key point. Never ask for money, rather, offer an "opportunity" to an investor.

Bill Worsley · Answer

Before, during, after and focus on people you know and trust (and whom you believe trust you).  You will not be able to close deals if your funding is not lined up - if I am selling, I want to know you have capital and are ready to go.  So I would start now.  First money hardest to raise if you do not have track record.  Be willing to give up more of the deal to build track record.  If you have proven experience and a string of successes, and are comfortable sitting across a table from someone and asking them to invest, you will be able to raise capital.

Will Barnard · Answer

You should always be looking for and attracting private money. It makes it easier if you do have a specific deal.

Jeff S. · Answer

Private money loans are much different than walking into a bank with your purchase contract, Andrew Shell.   You’ll find it a lot easier to get a private money loan from someone you have a relationship with.  This is especially true for a relative newcomer to the business, though your profile indicates a small amount of experience.

If you have someone in mind to borrow from, I suggest you go to lunch with them now to discuss your plans, your experience, and their interest.  Get to know them to build trust with each other.  Do this periodically so when a deal hits, you’re both ready.  The last thing you want is to find a killer property and have to scramble for money at perhaps less than optimal terms.

Jeff