Without raising private capital I wouldn’t be able to do what I’m doing today as an investor.
Those individuals who let me use their cash and/or credit to get my deals done are people I’m truly grateful to have in my life.
You might think that anyone who participates with me are my friends and family. While I do get to know them and feel very close to them over time, it’s usually not the case that we know each other well in real life. (Well, some of my investors anyway.)
That’s what you might not understand about raising private capital. These investors aren’t likely going to be your friends and family. They’re going to be everyday people you meet while running everyday errands, stopping to get coffee or shopping for groceries.
You might be chuckling right now, but it’s true. That’s because raising private capital requires conversations with strangers and a willingness to have those conversations.
It’s something I do literally every day of my life now. Of course, that’s not how it used to be, but we grow into the people we want to become, right? So I learned how to talk to people about what I’m doing without being a pushy sales-guy type. No one likes pushy people.
Once I became clear in my message I was able to start sharing it with those who would give me a little bit of their time over coffee. And, yes, it really is that simple.
Raising Capital Isn’t Complicated… It’s Conversations
After you realize that you are simply having a series of conversations with people about them letting you use their money in deals that bring excellent returns to them, well, these conversations get easier.
Truth is that you’ll start having fun doing it; you’ll look forward to talking to lots of strangers. That’s why I host Cashflow games, which is a recurring theme in my articles here on this site.
There’s a reason.
Raising private capital is necessary unless you have a very rich uncle or have bunches of money on your own to invest in properties. Because I buy apartment buildings, it makes sense that my fiduciary needs for these deals are a bit higher than let’s say buying single-family houses.
I can be very creative in my transactions and get seller financing, but still there may be rehab costs and other costs, which my investors help me with.
No two deals are the same; every single one can be structured differently, depending on what the seller wants and what the investor wants.
After playing a recent Cashflow 101 game here in Barcelona I had a number of people ask about leverage and the difference between using banks and raising private capital. I jumped on Periscope to share some thoughts on the subject. Click the video and find out why it makes sense to raise private capital.
Here Are 5 Quick Reasons to Raise Private Capital
If you want to do what I do as a real estate entrepreneur, which is buy properties using other people’s money and credit, you need to know a few reasons why it makes sense to raise private capital. So, here’s a short list:
- You are less restrained in what you can do vs. going through a traditional lender path. (We’ll need to chat about this, because there’s too much to go into here.)
- There are no stringent banking rules you have to follow; while there are some rules, they aren’t anywhere nearly as complicated as if you go through a bank for a loan.
- The investor can benefit by the improvements to the property that you make using his/her money. When you do things that will improve the value of the property and you have an agreement with the investor that he/she will get a percentage of that appreciation upon the sale of the property down the road (along with either or both a bit of the depreciation AND monthly cashflow) that’s called a win-win strategy.
- While you will go through the SOME of the same due diligence as required in a bank-lending situation, you may not have to go through much if you use creative acquisition and funding strategies. It’s up to you how deeply you will go. For example, you can waive the property inspection if working directly with the seller in a lease option or subject-to strategy. (Here’s where the “creative” strategies come into play.)
- You have the opportunity to provide a better quality-of-living experience for tenants. This one may sound odd until you realize that you have real people living in your units, and when you do things that improve the property across all those units, you are also improving the tenants’ quality of life by giving them better housing.
In short, you can take a piece of coal or diamond in the rough… a.k.a., a property that needs TLC and rehab… and turn it into a beautiful, sparkling jewel of a property. That means something that brings more value month after month, not just as cashflow but also in other ways!
You can turn an ugly property into something desirable.Tweet
Maybe it’s just a case of slapping a little lipstick on the pig, for instance, by painting the exterior and replacing small broken parts or even just a bit of landscaping and tree trimming. Or maybe you need to do a complete or partial overhaul by updating the interior of all the units in an apartment building.
Regardless of what you do, there will be costs involved, which means raising private capital to get you to your goals of owning good properties that serve tenants well and create killer cashflow.
If your goals are to create cashflow, participate in deals that give great returns and create more value in lots of different ways through real estate, let me help you reach them.
Contact me. Let’s schedule a time to talk. Hey, it’s just a conversation.
I’ll get back to you within 24 hours.
If you’d like to get to know me a little before asking me questions, join me at my next Cashflow 101 game. I have two… one for ex-pats that I conduct in English and one for everyone else that I conduct in Spanish.