Unless you are already rich and have all the cash you need to build your real estate empire, you will probably need to explore the world of private money. Private money can come in many different forms such as investor’s capital, private loans, and hard money loans. Most real estate entrepreneurs start with capital from friends and family. This may be the best place for you to start raising money for your deals. Depending on the relationships you have with your friends and family will determine if this a good place to start or not. They may be willing to join you in your deal or they may still see you as the person they remember growing up and not the new real estate mogul you are now. Regardless of their opinion the best way to start raising money from your immediate contacts is to focus heavily on your real estate education. Friends and family will know you are new to the business and may be hesitant to jump in. If they see the amount of education and work you are putting into your new business then that attitude may change.
When you are ready to start farming cash from new sources then you need to start by networking. Networking is one of the best business skills you can learn. In the beginning most people are nervous about networking. I have found that this is usually because the person is not comfortable enough discussing the subject of real estate. Again you need to be constantly working on your education. This will lead you to be able to network confidently, discuss and answer questions, and to start building trusting relationships with new investors. If you are not comfortable and confident in your ability to discuss real estate investing they will not likely be confident in you.
Next step is to create a business plan. This plan does not need to be and should not be about a specific property. You need to be able to show what your plan is for buying real estate. Focus on the market, the type of properties, what you will use the money for and roughly what your exit strategies are for your future deals. After creating your business plan, show it to people close to you for feedback before you take it out to the public. As you begin to network and share your business plan with potential investors, make note of common questions or objections that you run into. Incorporate these questions and concerns into your business plan. This will show future prospects that you are keenly aware of their needs and concerns before they even ask about them. Besides the obvious benefits of a business plan there is one that is not so obvious. By creating a great plan you take a lot of the focus and pressure off of you and your experience and put it on the business plan. This is a great way to help you be confident when approaching investors before you have done a bunch of deals. Whenever you get asked too many questions or the focus shifts to you and your experience you can always use the plant to shift that focus back to it.
Now that you know the need for networking and a great business plan, you need to focus on the next step. Marketing to potential investors. Again this step starts with an education. This time your education needs to go in the direction of securities law. I know that doesn’t sound like fun at first read but it really isn’t that big of a deal. What is a really big deal is doing it wrong and not knowing that you are doing it wrong. The Securities and Exchange Commission doesn’t seem to have much of a sense of humor these days (if they ever did). Learning how to raise money safely and legally makes the entire process much more fun and if you are having fun in your business, well…it’s just more fun. There are a ton of great websites and live events that you can go to and get this education without having to become a lawyer first. I highly recommend going to live events on this subject for one reason. The networking is great. Here is a room full of people that have come together for one reason…to learn about raising cash. This can be a great place to find potential partners and people who may be interested in joining you in your business.
Raising private capital can really make your real estate business fun and get you going much faster. You need to get your education, get confident and get networking. It’s that simple.