Raising money may be the most invaluable skill for any real estate investor. Without it you”ll spend all of your own money and take all of the risks. Finding money is as important (if not more) than finding deals. [This is probably obvious to everyone reading] Traditionally, investors look in two places for money:
- Friends and family
- Other real estate investors
Up until a few years ago these were the only areas to find money. Now, we live in a ‘green’ world dominated by ‘green’ news where green is cool, cutting edge and fashionable. Time for you to take advantage of that in your business.
By seeking out investors who fall outside of the real estate investing world. Basically, there are three pools of potential investment money. Other real estate investors are one pool and where you’d typically spend 99% of your time trying to raise cash. Almost no one approaches the other two pools of potential investors.
The three pools of potential investment money are:
- Other real estate investors – They want equity and a return on their funds asap.
- Seasoned investors – They invest in a variety of areas and want a consistent return and risk mitigation.
- Green angel investors – They want to invest in something green that has a chance to be successful.
While most investors focus on #1, you should really be focused on #2 and #3.
Other real estate investors are only going to judge your project based on their potential return. They also look at a ton of deals like yours. Nothing unique here, the numbers are the numbers. Most often, they are looking to make a quick profit and move on to the next deal. They drink coffee and read Inc. Magazine and Business Week.
Seasoned investors are looking for a good rate of return. They are not looking necessarily to get their money out as fast as possible. They consider a variety of industries, etc to invest in and like to diversify. They are interested in growing their money long term. They drink wine and read Wall Street Journal.
Green angels are the best because they are passionate about sustainability and want to invest in green but the offer from “Joe’s Solar Company and Dishwasher Repair” isn’t going to cut it. These angels can be your saviours. They want a decent return but better yet they want something that is easy to understand.
Rather than the typical NASA-like latest green tech company, “We manufacture solar film technology from silicon that is 50234,506 microns smaller than our competitors, etc..” you offer them, “I have a green multifamily that saves 15 million gallons of water a year and cash flows $200k annually.” Simple and easy to understand. Green angels drink anything organic (even whiskey) and read Mother Earth News.
Five reasons to focus on Green Angels and Seasoned Investors when looking for money:
- They are easier to close. Show them a decent return and they are yours.
- They’re more likely to accept your green pitch. Whether they believe in green or not, they get the value of a green investment.
- If they like your idea, they are more likely to turn you on to their friends as potential investors. It makes them look like they are on the cutting edge when they bring a green investment to their friends.
- Their interest level and curiosity will be higher because they don’t look at a lot of real estate deals and probably very few green real estate deals.
- No competition – Very few of your competitors are approaching these people. Easier for you to stand out and get funds.
All told, the opportunity is there for you with seasoned investors and green angels. They are out there, they are willing to listen and ‘green’ is a very compelling topic to them. Show them how you are going to help them reach their goals and you’ll find your money.