3 “Must Know” Keys to Recruiting Millions of Dollars in Private Money
| | Monday, April 13, 2009 @ 06:00 AM EDT
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Contributed by: Patrick Riddle
Patrick Riddle Properties
Read more archived articles about Credit and Finance
Do you have a great deal under contract but lack financing? Is finding money for your deals the biggest problem area for you as an investor?
It was for me when I got started. I focused so much time getting my first deal under contract that I didn’t stop to think what I would do when I got it. After struggling to finance deal after deal, I decided to learn how to recruit private money. I wanted to know that I not only had a private lender waiting for my next deal, but that I had an affordable way to finance it.
After spending years developing my list of investors and raising millions of dollars in cash, I have discovered that there are 3 “Must Know” Keys to having all the money you’ll ever need.
Do you have a great deal under contract but lack financing? Is finding money for your deals the biggest problem area for you as an investor?
It was for me when I got started. I focused so much time getting my first deal under contract that I didn’t stop to think what I would do when I got it. After struggling to finance deal after deal, I decided to learn how to recruit private money. I wanted to know that I not only had a private lender waiting for
my next deal, but that I had an affordable way to finance it.
After spending years developing my list of investors and raising millions of dollars in cash, I have discovered that there are 3 “Must Know” Keys to having all the money you’ll ever need.
“Must Know” Key # 1 : Plant Seeds!
That's the most important thing that you can start doing right now! Every person that knows that you are an investor and that knows about your investment program, whether or not they are in a position to invest, is one more seed planted in the soil.
Here are a few examples of planting seeds: Just flat out telling someone, sending out some form of direct mail, putting an ad on Craigslist, ad in the newspaper, or a link on your website describing your program. Any form of getting the word out about your investment program is "planting a seed."
Over the first couple years of recruiting money, on average, it took around 4 months to get someone to invest with us after first mentioning our program and planting the seed. Soooo be patient!
There are two types of people most likely to give you money: People that know and trust you and people that know a good deal when they see one. Keep this in mind when making your list of people to contact for funding.
Once you gain some momentum and have investor clients that have experience in your program, go for the third type of people most likely to invest with you. And they are the best there is….Referrals. After a couple years of working with private money, I didn't have to go out and seek additional clients. They just came to me.
“Must Know” Key # 2 : Ask Good Questions!
Your job, when meeting with a potential investor, is to “sell” the idea of investing in your program. In order to sell that idea, you must ask good questions! Asking good questions consist of two types of questions: Questions about the past and questions about the future.
Questions about the past will tell you what kinds of investments someone has taken part in, what rate of return they are accustomed to getting, how previous investments have been structured and the results of their investing experience. This can tell you so much about how to set up an investment that works for them and that goes with their investment strategy.
Questions about the future will be more centered on their future goals. These questions will elicit whether they are looking for long or short term investment opportunities, if income is important to them and so on.
By asking good questions, you can give them what they want. And if you are able to give them what they want, they will invest with you!
“Must Know” Key # 3 : Structure the deal so that it works for you!
Just because you can get a deal financed doesn't mean you should go through with it. It has to make sense for you the investor. This is where the “creative” in creative real estate investing gets its name. There are limitless ways to structure an investment loan.
When structuring an investment loan, it all starts by asking, “What’s my Exit Strategy?" Your exit strategy will ultimately determine the ideal structure for your private money loan.
There are two basic pay structures to an investment loan: Rate or Profit Splitting.
Whether you choose to pay a nominal rate or split profits with your investor, the easiest money on you would be "No payments, loan is repaid when the property sells." Setting up an investor loan like that will put you in the driver seat. If you plan to hold the property for awhile, it may make more sense to make regular interest payments to your investor.
Patrick Riddle has done over 100 deals since he started investing just over 5 years ago. He is considered an expert in creative real estate investing techniques, lease options, short sales, and recruiting private money. He has raised over $6,000,000 in cash from private investors for his company.
Note: Check out http://www.MustKnowInvesting.com for information on our next Free Webinar: How to Recruit Millions in Cash from Private Investors for Your Real Estate Deals.
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