How to Raise Private Money for Deals

If you are thinking about becoming a real estate investor, you are not alone. It is a very exciting business that can help you make big bucks in one go. But it’s not always rainbows and unicorns with the perfect profits and better deals – you may lose money too. It can be overwhelming when you examine methods and ways to invest and finalize deals.

Your first question is going to be about money. How will you raise the amount to make your first investment? We are talking about big sums since the investment is in real estate – not in shares right? For financial investments you can always invest lower amounts but when it comes to real estate – you are looking at bigger money with bigger profits.

Raising private money to invest in real estate can be daunting but if done right, you can achieve the result and make the right profits at the right time. Raising private capital will require you to qualify as a buyer but the process is much different than applying for a traditional mortgage. The difference is getting experience as an investor with a reputation that you know what you’re doing and you are reliable and trustworthy whereas a bank looks at your financial history to qualify you for a mortgage. But a private investor will seal a deal based on trust and your prior experience.

Use Your Savings First

To start with, you can use your own cash. Because who believes in you more than you at the starting line, right? If you do not have enough hard cash to start with, start saving! It may sound basic but this step is essential. You need to commit yourself to become a real estate investor and for the first deal, you need to use your own money. The amount of money out of your own pocket will be dependent upon how good of a deal it is. Hard money lenders base their decisions off the attractiveness of the deal first and then secondly on your credentials as the investor. I know hard and private money lenders that don’t care at all about your personal experience. If the deal is bought low enough, they will lend on it. If you screw up, they will take the house back through foreclosure or deed in lieu of, and resell the deal and still make a hefty profit. The point is that you want to have liquidity in your bank account so if the deal doesn’t go as smoothly as expected, you will survive to play the game another day and still pay your regular bills. Learn and practice some good saving tricks. Investing your own money will have some life altering experiences for you. You will value every single penny that you saved and will invest wisely. The determination to invest your savings will make your first investment less risky. Your focus will be on making profits while avoiding and mitigating risks. This will make you value other investors in the future when you start your business. You will be more careful with money on every project. This is essential for the success of your business. Being sensitive about investments will result in lower losses and higher profits.

Do Not Overlook the Details

Make sure that every little detail has been documented. It is important for your business success and your future business deals. Record everything from the purchase to the rehab and the final sale. Jot down all the details of everything that you learn that go along with it. Keeping a personal journal may help with this. Never hesitate to keep a spreadsheet and/or a camera around to make sure that you maintain records accurately. All the documentation will give you a reference point for your future projects. This will also serve as a foundation for your business. You can show these off to potential investors and private money lenders.

Network!

When everyone had doubts about your business decisions, you kept going. Now is the time to look them in the eye and boast about your business success. Once you get a few deals under your belt, talk about them. Visit places where you can network with other people and potential investors. You can get ahead of the competition by going to business associations, investment clubs, and conferences held both nationally and regionally. Once other people in your industry know who you are and what you have already done, be ready to receive some exciting offers. People may offer partnerships, joint ventures and even hard money to work with you. It’s all about creating an interesting, trustworthy profile.

Work Responsibly

In every career comes a dark phase. It happens with everyone and it may happen with you too. There could be a deal where you lose your money – or worse – someone else’s money. If you have a plan on how you will pay the lender back, you are good. As they say: work for the best and prepare for the worst. Keep all scenarios in mind and prepare for them. If you are taking hard money from someone, make sure you know how you plan to pay them back. This strategy will help you build a trustworthy relationship with your contacts. If you build a reputation of trust and honesty, you will attract future deals easily. If you build one stress-free relationship with your funding partner, you will get better offers in the future. The world of real estate works on reputation and word-of-mouth experiences. Make sure nothing spoils your reputation.

Raise Money

In a nutshell, raising private money for real estate investment is all about finding good deals. If you find a good deal, chances are that money will also find you. Finding good deals as a real estate investor takes a lot of hard work. Make sure that you do your research before closing a deal with anyone. A well prepared investor is already successful!

By the way… if you want to skip all of the deal-finding work and have 40-50 discounted houses delivered to your email inbox every month, so you can focus on rehab or landlording, I’d be happy to assist. Drop me a line!

Tim LaBorde

Directed Realty

713-965-4561

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