In working with real estate investors all over the US, I would have to say that one of the most common hurdles that many new investors face is probably a lack of money.
How many times have you met a new investor who tells you that they have the most amazing deal and the only hurdle from making it happen is that they need the money to fund it?
Well, if you network with other investors like I do, then you probably have heard this excuse at least a handful of times.
This is where the Chicken or Egg question comes up in terms of real estate investing.
Do I need to have money in order to find the great deals or do I need to find the great deals in order to raise investor money?
Let me know what you think, and in the meantime, I will share some of my thoughts.
How to Analyze a Real Estate Deal
Deal analysis is one of the best ways to learn real estate investing and it comes down to fundamental comfort in estimating expenses, rents, and cash flow. This guide will give you the knowledge you need to begin analyzing properties with confidence.
I personally don’t agree with the theory that you need money in order to find great deals.
No matter what people may tell you, the truth is that as a new investor, it is often hard to get started in real estate. Without any prior experience or track record, what sophisticated investor would be willing to give you money to invest before they know what the deal is?
If you are lucky, maybe mom, dad, grandma, and Aunt Susie will give you their money to start on your new real estate venture. But without any experience and without a great deal to present, the likelihood of an unrelated person giving you their money to invest is slim to none.
I tend to be of the belief that if you find the great deals, the money will surely follow.
As an investor myself (and being a CPA), I look at every deal by the numbers. If the deal makes sense and the investor has the abilities and integrity to perform well, I personally would consider such an investment even if the investor does not possess years of real estate experience.
If you are a newbie investor and you have found “lack of money” to be your number one obstacle, here are a few suggestions to consider:
Do the Leg Work:
Whether it’s looking for deals on the MLS or networking with wholesalers to uncover that hidden gem, spending the time to find that awesome deal is extremely important when starting out in real estate.
Investors need to know what their money will be invested in and how you plan on generating returns on that money. Pocket listings are great but believe it or not, one of the best deals I found was actually a very outdated listing on Loopnet that no one else was calling about.
By the time I spoke with the seller, he was just so happy that someone was actually interested enough to call about the property that he was more than ready to negotiate.
Highlight Your Talents:
Just because you are new to real estate doesn’t mean that you don’t have special talents to contribute.
If you used to be a sales manager, you are probably a world-class negotiator. This can be extremely helpful in the real estate world because profits are often made at the time you purchase the property.
If you are an accountant you are probably a great person to analyze numbers. If you can work through the numbers and determine a good deal from a bad one, this is something extremely important for a potential investor to know.
Highlighting your unique talents and expertise when speaking with potential investors can be a tremendous help when building credibility for your first few deals.
Learn to Talk:
Of course you know how to talk but what I am referring to is the art of talking to potential investors.
With today’s busy schedules, what most people value is their time. Be prepared, be concise, and be articulate. How you communicate your deal to potential investors in the first two minutes of the conversation can often make or break the deal.
Always Be Talking:
People often ask me where are good places to find investors.
Is it real estate club meetings? Is it country clubs? Is it networking events? Well, the answer is “everywhere.” Talk to everyone about your real estate investing. Whether it’s your college friends, co-workers, dentist, or next door neighbor, you never know where your next investor will come from.
One of my most successful investor clients met his largest investor at a Tai Chi class in the park. Who knew that an old sweaty lady would be the multi-millionaire investor he was looking for the entire time?
Have you ever had an experience like that?
Be sure to leave your comments below!