Just imagine. Today you’re sitting here with no investment properties to your name, but in a few short years, you could be making a living full-time as a real estate investor.
You could be living a life of complete control over your time. Freedom from 9-5 wage slavery. Financial independence. The security of knowing that you have an income that is not dependent on a boss or a company that could fire you at any moment.
What it takes is to learn how to raise money from other people to fund the equity in your real estate deals. If you learn that skill, you will never need employment again.
Obviously, when you are a seasoned investor with a history of successful deals and a long list of clients, this is easy.
But what about when you are just starting out? How do you break through and fund your first deal?
Why would people give you money to invest if you have no funds of your own and no experience?
They will do it because of YOU.
Now, this may sound simplistic, but bear with me and you will find out why this is true.
People will invest money with you or not based on two things: (1) whether they trust you with their money; and (2) whether they believe you can execute.
In the case of investing in multifamily real estate, you’re going to start with family and friends, as with any startup business.
Family and friends already know you and trust you. (If your own family and friends don’t trust you, you have bigger problems you need to solve than raising money for deals!) That’s half the battle right there. Trust is the hardest thing to gain, and with the people who are close to you, you already have it. So why not pick the low-hanging fruit?
Your friends and family also know whether you can execute. Are you the kind of person who is really well organized? Who always does your research? Is thorough? Has a history of completing what you start? Has a history of achievement in your other careers? Your family and friends are the ones who already know the answers to these questions and don’t need to be convinced of your abilities.
So, start with the people who already believe in you, because you don’t need to convince them that you are trustworthy and that you will execute.
You build upon this trust by putting together a good “pitch deck” explaining your business plan – the kinds of deals you want to buy, where you want to buy them, what your exit plan is, and why you think all of this is a good idea. They know you have no experience, and you overcome this by showing them the team of highly trained professionals on your team who will execute for you.
Then, once you have whet their appetites, when you have a deal in hand, you go back to them with the specifics in a well-prepared document that shows you have done all your homework and that you are working with a team of experts – property managers, lawyers, bankers, accountants, who will execute the deal right.
Some people may object if you are not putting your own funds into the deal. And, of course, it’s always better to do this if you can. But, even if you cannot, if you structure the deal correctly, with the right incentives, you can show people that your interests are 100% aligned. This overcomes the objections of most investors. And, if they already trust you, this objection will not be very strong to begin with. Especially with family and friends, who are inclined to want to help you get started.
Of course, now you must execute! You must put your investors’ interests ahead of your own. You must own up to mistakes promptly and show what you have learned from them. You must report everything that’s going on with your properties – good and bad. Investors should never have to ask you what’s going on.
Once you have done all this, you can now build upon your base of family and friends. Introductions are always the BEST way to build a network, so have your family and friends introduce you to the people they know. TRUST transfers along with person introductions, so always start with introductions.
This is exactly the methodology I used to get started. And you can use it too.
Feature post photo by Grant Lemons on Unsplash.com