I know private investors are tough to find, especially if you are just starting out.
I’m not sure your experience level, but put yourself in their shoes for a minute: private investors have a lot of money because they’ve worked hard for a long time. (Okay, some of them, perhaps, inherited the money or were just lucky – but most of them are smart and have worked hard.) Therefore, private lenders don’t throw their money around – especially to new investors. So it feels like a catch-22. You can’t raise money until you have experience, but you can’t gain experience without money.
What’s a newbie to do?
The One Thing Private Lenders Care About
Deep down, I believe that most private lenders care primarily about one thing, above all else, and if you can offer this one simple thing, you can get more money than you could ever handle.
Do you know what this is?
Pretty much, everything boils down to this one thing. If you can solve this concern, you can find unlimited money in this world to fund your real estate deals.
Seems almost too easy, doesn’t it?
The fact is – it is easy to understand, but a little harder to carry out. Isn’t this the case with most things in life? After all – we all know how to get a six-pack… but how many of us really do what it takes to get there? I know I need to stop eating candy, do a lot more crunches, and jog everyday… but the couch just seems so much more appetizing, doesn’t it? (Though… I’ll have you know…I just got P90x3 for Christmas and have started… just wait!)
So how do you solve this concern? Let’s talk about it…
Security and Raising Private Money
As I mentioned before, people with money have it because they’ve worked hard for it.
Perhaps they’ve scrimped and saved for 40+ years, or perhaps they spent years of nights and weekends building a profitable business. Either way… they are not about to throw away their hard earned cash on a risky bet.
So how can you reduce their risk and increase their security?
Through great deals and strong competence.
The two go together like peanut butter and jelly, like the Lone Ranger and Tonto, like Bert and Ernie.
If you are having trouble raising money because you are being turned down by everyone you approach, you are lacking in one of those two areas. It’s as simple as that. Don’t try to convince yourself otherwise. Perhaps you have a great deal, but you lack the knowledge/competence to make the deal succeed (in the eyes of the investor, at least.) Or maybe you have the competence, but you lack the great deal. You need both.
If you find a house worth $1,000,000 that you can buy for $40,000 – I would wager you wouldn’t have a problem finding money. However, the second half of that equation is competence. Even an amazing deal can turn sour if the person in charge is not 100% capable. So the best way to increase that is to learn more, read more, study more, teach more, and network more. Hopefully that’s why you are here, and why you are a part of BiggerPockets. To learn how to become a better investor.
However, if you are not attracting financing because you aren’t asking for it (or asking properly) perhaps there is another issue. One of my favorite moments in the recent Podcast interview with Mike Simmons here on BiggerPockets was when Mike told the story of how he and his wife told EVERYONE about what they were doing in real estate. They blogged about it, spoke at REIAs about it, talked with family and friends about it, and shared their story with everyone who would listen.
Awesome, isn’t it?
Be Like Mike. Start talking about your goals, your dreams, your actions. What are you doing, right now, to become a better real estate investor? Whatever your answer is… go post it on your Facebook page! Seriously, like right now. I’ll wait. And while you are over on Facebook, be sure to “Like” BiggerPockets as well. Or just click this little like button right here:
Alright – hopefully you can see how easy it is to know how to raise money: by offering security.
However, as this post has laid out, this is easier said than done. However, if you keep this one thing in mind as you grow, learn, and expand your business, you’ll find no trouble raising money to fund your killer deals.
So continue learning and gaining competence. BiggerPockets exists for this one reason – so take advantage of it! If you haven’t read through The Ultimate Beginner’s Guide to Real Estate Investing yet, start there. Then check out the Podcasts (AMAZING interviews) and introduce yourself in the BiggerPockets Forums and let everyone know who you are.
Questions? Comments? Concerns? Leave ’em below and let’s chat!