Today I’m going to share with you the lessons that I’ve learned by raising $3 million in equity for a real estate investment property.
Before we start, keep in mind that these three lessons can be used all across the board. Whether you’re doing smaller deals or bigger deals, these lessons apply.
For starters, when you’re putting together a project like this that involves equity, you must get a lawyer involved. The documents to structure these deals can be very involved, and you need to make sure you cover all your bases—including keeping compliant with the SEC. This isn’t a lesson, this is a must!
The deal in question was a 198-unit building in North Carolina. I’ve posted some other articles on BiggerPockets with videos discussing the analysis of the deal, so be sure to check those out too. The project required just over $3 million in equity to cover the purchase price, closing costs, and renovations. It was a great deal, but it was much larger than our previous equity raises. I jumped in and after a lot of hard work, webinars, phone calls, lunches, and coffee meetings, I got it done. Here’s a quick summary of what I learned. Be sure to watch the video below to hear the whole story.
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
Lesson #1: Not Every Deal Works (For Your Investors)
When you’re raising private money, keep in mind that not every deal is going to work for your investors. This particular deal was a 10-year hold. Not all of my investors were interested in parking their money for that long. I have people who invest with me regularly, but they’re looking for something different. Perhaps a quicker turn around—like six-to-nine months. And that’s OK. The key is to talk to your investors and find out what they’re looking for. Take note of it and offer it up when a deal arises that’s in line with their goals.
Lesson #2: Stay in Touch
When someone tells you “No,” they might mean not right now. No, and not right now are two different things and can sometimes be confusing. This is why it’s important to check in with your prospects regularly. The person who said “no” six months ago might be in the position to invest with you now. Remember, your investors are busy. They’re more than likely not going to think to call you if they’re looking to invest in something else. Make sure that you check in and keep in touch regularly.
Lesson #3: ?
This one is a great lesson I learned on how to turn a “no” from one investor into a “yes” from another. You’ll have to watch the video to hear about it. Check it out!
I hope this helps. Good luck out there.
Do you have other tips for raising private money?
Share them below!