How to approach private investors to finance your real estate projects
Capital is critical at this time. Cash is king. Approaching private investors for capital is something that gives real estate investors a lot of sweaty palms. This is mainly due to fear of failure or hesitation to step out of the comfort zone. Like making your first offer or talking to your first prospective tenant, private money is something that can be learned, usually very quickly.
A common trend seen among real estate investors (of all experience levels) is to wait for deals to emerge before approaching investors. Although it is a conventional technique and is considered safer, it is too time consuming and carries the risk of leaving too many opportunities intact. So even if you have a good deal on your hands, it may take a long time before you find the right money to make it happen. You may miss out on other profitable offers as well, and investors are sure to notice your lack of foresight and confidence.
A better way to raise private funds for your real estate investment projects is to reverse the order. While I agree that this option is much more aggressive, it will give you better results. Be a little more confident, get the money first, then move on to the deals.
What you will quickly learn is that there are a lot of private investors desperately looking for fresh air and more profitable deals. So all you need to do is give them confidence about your business plan and projects, and they will be happy to ditch your financial planner. Playing cautiously and waiting for all the street lights to turn green before stepping on the gas is a recipe for mediocrity.
Deals move fast in today’s world. And, if it is the big projects you are targeting, you will definitely need to have adequate financial backing. If it is an asset manager or commercial broker helping you find real estate deals, they will in no way be willing to spend time with you unless you have enough capital available to close the deal.
The biggest benefit of this ‘ready to target’ approach is that you can get the best deals at any time – your deals and LOIs go to the top of the pile. In today’s market for bargain-hungry investors, every little edge helps your bottom line.