How to Market for Private Equity

Mike: Welcome to the flipnerd.com podcast. This is your host, Mike Hambright, and on this show I introduce you to expert real estate investors, awesome entrepreneurs and super cool vendors that serve our industry. We publish new shows each week and have hundreds of previous shows and tip videos available to you, all of which you can access by visiting us at flipnerd.com or visiting us in the iTunes store.
By the way, flipnerd.com is the most robust social platform in existence for real estates investors where you can find off market wholesale deals in your market, find great local vendors to help you in your business in your market, and socialize, learn and grow with others in our industry. There is truly nothing like it. If you’re not already a member please visit us at flipnerd.com today where you can set up a free account in about 30 seconds. Everybody’s doing it – the cool kids, and even the nerdy ones – so get on over to flipnerd.com. Now let’s get started with today’s show.
Hey, it is Mike Hambright with flipnerd.com. Welcome back for another exciting VIP interview where I interview some of the most successful real estates investing experts and entrepreneurs in our industry to help you learn and grow.
Today I am joined by Josh Cantwell he is the CEO of Strategic Real Estate Coach and Josh has a ton of experience, has purchased over 600 houses. In order to fund his business, Josh has become an expert at raising private capital. In fact, most successful real estate investors, as you probably know, have learned to raise cost effective capital to facilitate their business and give them the ability to buy with confidence.
Today we are going to discuss specifically how to market to raise private capital. Before we get started, though, let’s take a moment to recognize our featured sponsors.

Advertisement: RealtyMogul.com is an online market place for real estate investing, connecting borrowers and capital from accredited and institutional investors. Get a rehab loan fast and close in as little as 10 days. Rates start as low as 9%.

We’d also like to thank National Real Estate Insurance Group, the nation’s leading provider of insurance to the residential real estate investor market. From individual properties to large scale investors, National Real Estate Insurance Group is ready to serve you.

Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions as real estate investing can be risky.

Mike: Hey, Josh, welcome to the show.

Josh: Hey, Mike, I am doing great. How are you?

Mike: Good you’re the money man.

Josh: Yeah, I have been called that once or twice before but I don’t take that too serious but, yeah, we love focusing on raising private capital. Thanks for having me on.

Mike: It is such an important part of the business and a lot folks let it become an excuse. “I can’t do it because l don’t have the money.” For sure you and I both know a lot of people that have been in this business for a long time. Anybody that has done this for a long time, has been an investor, has cracked the code on financing to where that’s not really an issue anymore.

Josh: That’s right. Yeah, absolutely, it is the most important thing. To meet funding equals freedom and there is a lot of people out there who wholesale properties and almost, unfortunately, have to or are kind of forced to exclusively wholesale because of lack of funding.

Mike: Yeah.

Josh: Earlier in my real estate career we were flipping a lot of short sales and doing some wholesaling. When I came out of my surgery that I had, this life changing surgery I had back in 2011, it was interesting, I actually flipped a house while I was in the hospital and made $40,000. Then I flipped another one two, three weeks after that and made another $40,000 and then another one two, three weeks after that, made $50,000. So came back from my surgery, we made you know made $120,000-130,000 in 90 days or less and it dawned on me that that was where I wanted focus.
So just two and a half or three years ago I made a really personal decision that that was going to be my expertise. I was going to interview every securities lawyer, talk to every person I could, learn everything I could about private equity, and that’s my focus then and it’s been my focus now for the last two and a half years.

Mike: And you’re specifically talk about rehabbing?

Josh: Yes. We also own a number of rental portfolio properties. I just bought a commercial building. When you talk about when you have access to capital the deals kind of come to you. You don’t necessarily always have to be marketing for deals when you market for money and you have money. There’s plenty of people who don’t have money . . .

Mike: Absolutely.

Josh: . . . so realtors, other investors, they tend to bring deals to you because they know they can maybe wholesale it or get a commission. Even just about three, four weeks ago l bought a medical office building. It was appraised at $1 million; I bought it for a $185,000.

Mike: Wow.

Josh: It’s only five years old, it doesn’t need any work, it just needs some build-out inside. There’s never even been a tenant or occupied . . .

Mike: Wow! That’s awesome.

Josh: . . . and a foreclosure with a developer. But when you have access to capital sometimes that stuff just finds you and that’s what happened there.

Mike: Yeah. It’s interesting, you made a comment about people that feel like they have to wholesale. I talk to people all the time that are wholesalers. The problem is your going to come across some deals sometimes that you can make a lot more money if you retail it, or you come across deals that are a little bit tight from a wholesale perspective, like there is not a lot of opportunity to make a lot of money, but it’s in a cherry area and you can retail it all day long and do really well on. So you kind of have to pass on those deals if you don’t have capital, right?

Josh: That’s right, exactly. So we definitely do a lot of rehabs. In my own business now we have 14 or 15 rehabs going on right now. We usually carry 12 to 15 at any one time and then of course when you have access to capital this other opportunities like this commercial building come up. You have to take advantage of those when they land, so you want to be able to be flexible, be able to move and dodge and weave. When certain opportunities hit your lap, you want to be able to take advantage.
Unfortunately, if people don’t have capital they have pass on everything and just wholesale. So l want to encourage people, even if they are a wholesaler, to do both.

Mike: Yeah. There’s no doubt the most successive real estate investors ultimately are opportunists, I mean, you’re presented with an opportunity and you need to take it if it makes sense. It’s a shame that it makes sense but you can’t take it because you can’t fund it.

Josh: Right, yes. Isn’t that just a dagger in the heart when you know you got a good deal?

Mike: Absolutely, absolutely.

Josh: I mean, this property, I can easily put in the market today for probably $600,000, not do anything to it and sell it. Man, it would just be a dagger in the heart if I couldn’t have taken advantage of that one.

Mike: Yeah, absolutely. Before we get too far into it, Josh, tell us your background a little bit and kind of how you got to where you are today.

Josh: Sure. So I was fortunate to, right after I got done playing football in college at a small school, I was recruited into a financial services company. So at 20 yrs old I took a top ten internship in the country as rated by Forbes magazine and got right into financial services, selling insurance and mutual funds, annuities, IRAs, stuff like that, and had a lot of success with that. Usually my clients were three or four times older than me. I was 20 and they were 60.
Did that financial planning for about 7 or 8 years, realized that my most successful clients didn’t have all their money in the stock market. Most of them owned real estate. They owned restaurants but they didn’t own the restaurant, they owned the building. They owned rental portfolios and apartment buildings.
So I took notice. I bought my first investment property in 2001. It was a two family. I lived in half and rented out the other half. Then went full time in real estate in 2004 and since then I’ve bought and sold nearly 685 properties, kept a number of them as rentals but flipped most of them.
Really, for the past three years, as I had mentioned, my passion really kind of went back to the financial services that I used to offer when I was much younger and became a student of capital. We’ve automated a lot of our other business. I have a couple of acquisitions managers that find properties and we have construction guys that fix them up. I owned a real estate brokerage for a long time that would sell them, and I just sold my brokerage and partnered up with another brokerage. So I knew if I could get access to all the funding I would ever need that I could build a team around that.

Mike: Sure.

Josh: That’s my focus now.

Mike: So I know several different people that are very good at raising money and they kind of got started in a similar way. They were in financial services, financial planning of some sort and just talk about the role that that had in your ability to raise money because effectively you’re consulting people on what to do with their money and so I am sure in your mind, more so than somebody that doesn’t have that background, they get that there are people out there looking for places to park their money, not necessarily in the stock market.

Josh: That’s right. My background, Mike in, financial services just gave me the confidence to know that real estate and even real estate lending is the hands down winner compared to the stock market.

Mike: Right.

Josh: The stock market’s averaged about 9% return over the last 100 years and 8% return over the last 10 years. So when you look at the history of the market with all the ups and downs and the stock market is heavily influenced by the political markets, now the overseas markets, the financing markets, there are so many moving parts. What I realized was that when I had clients I could never ever tell what was going to happen tomorrow.

Mike: Right.

Josh: But in real estate when l buy a piece of property and somebody makes me a loan and l give them a fixed 13% return, they know that they are going to get that 13% return. Now, of course you can never say “guaranteed” but it’s secured against real estate and we’re buying that real estate at a huge discount and all of the up side of real estate where they basically become the bank. So l think what helped me in the financial services was just the confidence to know what else was out there and if there is somebody listening to this who’s never raised a stitch of private money and they’re thinking, “God, I can never do that,” just understand that the world’s best stock brokers and financial advisers, they all have the same approach, which is diversify and wait.

Mike: Right.

Josh: Diversify and wait, and they don’t know what is going to happen tomorrow. So you’re not really fighting against anything that has such a great offer that real estate can’t compete. It can compete and so when people know hey, I can get maybe 6, 8, 10% on the market with lots of ups and downs or I can get 13, 14, 15% fixed as a real estate lender, which would you rather do? Would you rather get regular recurring monthly income or annual income that you can count on? Or would you rather wing it on the market?

Mike: Right, and secured by an asset ultimately, right?

Josh: And secured by an asset with a lot of equity typically. If it need a little bit of repairs or even lots of repairs, got lots of upside. So really what I learned was the confidence in knowing what l was offering from real estate is just far better than what is there in the market.

Mike: Yeah, and you probably know this better than anybody, Josh, but this is how I feel. I was a finance undergrad. I worked for a huge bank that had over a trillion dollars in custody, a very, very large bank. Where I got dismayed was all this money managers that are managing these ultimate retirement accounts, everybody is trying to keep up with the S&P 500. It’s like, well, as a finance guy you start to say, “Why doesn’t everybody just invest in the S&P 500 then?”

Josh: Right?

Mike: But aside from that, I feel like personally that I can’t trust the stock market as much as I thought I could earlier in my life. It just feels like there is so much more political influence and so much more volatility and so much more financial engineering going on than maybe there was 10, 20 years ago.

Josh: I completely agree. You couldn’t have said it better. I think the term “financial engineering” is key because you have a certain people who are definitely influencing the market, sometimes technology influences the market, you have people now trying to beat each other to certain trades to make money. The world is such a big place, you have so many people involved now in the markets. I just don’t have any confidence in my ability to make good choices when somebody else knows 100 times more than I do, and they can easily make a contrary decision that can influence my investment dollar.

Mike: Absolutely, and all that makes real estate or potentially private lenders even more appealing in our space than maybe even more so in the past, right?

Josh: You bet. I think what people are looking for, knowing what a 50, a 60, a 70-year-old is looking for, they’re looking for yield. They’re are looking for preservation of principal and something that just spins off a monthly or quarterly or an annual dividend or an annual interest rate that’s a fixed number that they can count on.

Mike: Right.

Josh: But unfortunately, bonds are paying about 3.5%, fixed annuities are paying 3-3.5%, CD’s are paying less than 1% so where do you go to get a good high single digit or great double digit yield? Throw your hands up, you can’t find it unless you become a private equity investor or a private lender in real estate.

Mike: Yes. Awesome. Today I know we are going to spend some time talking a little bit about how you market to raise private equity but hopefully you can kind of boil that down for the person that really doesn’t have an experience with that yet and maybe how they can get started as well.

Josh: Sure.

Mike: And I just want to clarify too, anybody listening to this, you could probably give a better footprint here than I could or a fine print, Josh, but if anybody is listening to this, you certainly want to consult with your attorney and professionals when you’re looking to raise money because there are a lot more laws out there than people would lead you to believe in this space.

Josh: Sure, you bet. I am not an attorney and I’m no longer a financial adviser, I am not licensed so they need to seek that professional help. I have a great securities lawyers and other lawyers that I work with. My securities lawyer is Ralph in the St. Clair Shores, Michigan area. He’s licensed to practice securities law all the way up to the Supreme Court, so l rely on him. So certainly anything that I say is kind of just a repackaging of what Ralph has taught me.

Mike: Sure and after we’re done here I’ll get Ralph’s information so anybody listening to this, as long as you’re willing to share it, we’ll add it down below the page here for anybody that might want to contact him.

Josh: Yes, you bet. Ralph Sherman from St. Clair Shores, Michigan. So the interesting part is, I would say, with anybody looking to raise private money or private capital there’s two ways to do it. There is through debt financing or equity financing. What that basically means is through debt financing you’re offering somebody a note in a mortgage or a note in deed of trust against your property, pretty straight forward.
Equity financing is your giving up a piece of your deal or your giving up a piece of you company and giving them some stock ownership. So people need to understand that. I prefer to be a debt investor. I prefer to own the real estate and own the capital and have money that I borrow. So I am the borrower, they are the private lender and they own the debt.
It is a big distinction because you can offer either one. Regardless of what you offer you are dealing in securities. You are offering a security and that’s highly regulated by both the state and the federal authorities, the SEC.

Mike: Right. Why don’t you maybe share a couple of little nuggets on some of the misinformation that’s out there because I know a lot of people think, “Well, I’m just raising it from my uncle or my brother-in-law,” or something like that but you and I know both know that’s still a security.

Josh: Yes. Absolutely. So, Mike, what’s important to understand is, first of all, are you operating within your state or are you criss-crossing state lines. If you’re operating within your state where you, your LLC, your property and your private lenders are all within your state, you’re now governed by the state that you live in or you operate in. I am obviously governed by the state of Ohio and the Department of Commerce which oversees securities in Ohio.
What’s great is each state has a certain number of private lenders and a certain number of notes, a certain amount of money that you can raise before you have to do any kind of significant registration, before you have to do anything. Like in Ohio l can have up to 10 private lenders and get 10 notes and raise up to $1 million, so long as I stay within the state of Ohio and I don’t have to tell anybody. I don’t have to file anything, I don’t have to register anywhere, I don’t have to do anything. In California you can get 25 investors and 36 out of the 50 states are allow you to raise some private capital and up to a certain amount of private lenders or notes without having to do any registration at all.

Mike: So at that point the federal laws and SEC don’t apply is what you’re saying?

Josh: As long as you’re staying within your state, yes. It’s just the state laws that apply, that’s correct. Then once you go beyond your state limits, when you’ve raised more private lenders more notes and more money, typically the ceiling is $1 million. Some states it’s $500,000. Then you know you need to register on a federal level because you have raised beyond $1 million dollars.
It’s great. The local state economies, they want to spur small business owners, including real estate professionals, to raise private capital and so they allow you to raise a certain amount with a certain number of notes and mortgages and you don’t need to do any registration at all, in most states. In 14 states you have to do one simple paper and it is like a $50 filing or $100 filing fee, pretty simple.

Mike: Yes.

Josh: So that is where most people start raising private money is in their state with people that they already know, with people that they already have a relationship with.

Mike: Sure, yeah. So talk a little about the marketing side of that. I mean, for somebody like you that’s done hundreds of deals, obviously once you’ve kind of been validated and you have a track record, it becomes that much easier to do a lot of things, including to raise money. But talk about if somebody is newer, maybe kind split up what you are going to share with us about in terms of marketing – like if you have some experience versus if you don’t have any, how you would effectively market yourself and the opportunity.

Josh: Sure. So compensation drives behavior, Mike, right? So compensation to me, and when I speak and teach on webinars and stages, I typically talk about compensation and recognition drives behavior. But in the case of a private lender it’s all about money. So if I’m a new investor and am working within my state, I can’t do any general solicitation or marketing to a stranger. I can’t make an offer. I can’t say I’ll pay 13% return. I can’t offer a certain deal because that is actually making a offer.

Mike: Right.

Josh: The state and federal authorities basically say that you have to have a prior existing relationship with somebody to make them an offer, so most people have to start with friends, family, people in their social networks, people at RIA clubs, people that they know from wherever, and talk with them. So for a brand new investor it really comes down to what is in the mind of that private lender. Private lender is looking at risk/reward and the risk is, “Hey, this guy is a new investor,” but my reward is, “maybe I can get 50% of the deal, maybe l can get a larger return on my money.”

Mike: Right.

Josh: So if I’m a new investor I’d happily give up half my profits if I can get a private lender to foot and front all the money. I’ll do all the work, I’ll be the boots on the ground, let somebody else be the money guy, I’ll happily split it 50-50 just to get my real estate career going. So I would encourage people to think in those terms. I would encourage people to think of more being an equity private investor, giving up some equity, to recruit capital if they’re new.
Now, as you get more seasoned and you have more contacts, more people and you do some federal filings where you can actually start doing some advertising – it’s called a 506(c) registration – now you’re talking about opening up this giant treasure chest to potential investors, and because there is more investors that are looking for yield, you can pay them a lower return. You don’t have to give up 50%. Maybe give them a 10% return, 12%-13% return.

Mike: You’re less risky at that point because you have got more experience, you’re more buttoned up in terms of what you’re offering.

Josh: That is correct. We’re more educated, we’re more experienced. We have a larger network, we can liquidate properties, we have more of our own money, so we’re a lower risk person to invest with and we have more contacts and so we have to offer less to recruit private capital.

Mike: Sure.

Josh: When it comes to marketing, though, Mike, the key, and this is one of the beautiful things about our federal government, it was an 80-year-old ban on marketing for private capital unless you were a registered broker dealer until 2012. In 2012 the Jobs Act comes out, the SEC and Congress fought back and forth and ultimately Congress won. Congress said, “Hey, we need to open up the coffers for small business owners to raise private capital.” According to Ralph, the SEC absolutely did not want to do this. They were forced to do it by Congress and so the 506(c) registration was born.
The 506(c) registration, if you have that, which we do, now allows you to advertise to the public, whatever your offer. You can literally buy a billboard in Times Square that says, “We pay 13% fixed return. Here is my phone number, here is my website, come invest your money.” Now, the 506(c) registration only allows you to actually take in money from accredited investors. They have to be accredited, which means they have a $1 million net worth or they have a $200,000 annual income if they are single, $300,000 if they are married.

Mike: Okay.

Josh: What’s great about that, Mike, and what we’ve done is we’ve paired up a 506(c) registration with a 506(b) registration in two separate companies – one has a 506(c), one a 506(b) – so if we have a spill over of investors who respond to our marketing and advertising who are not accredited, they can invest into our other company. We just have to wait 30 days, we have to allow us to create that prior existing relationship and we can recruit millions and millions, tens, hundreds of millions of dollars of capital and we can do any kind of advertising or marketing we can think of, Mike. You can do direct mail, you can do Craigslist ads, Facebook, billboards, you name it, to raise that money.

Mike: Sure. So for somebody who’s starting off that needs a half million or a million, doesn’t really need a tremendous amount of money, what are some of the best ways to maybe market that, to find that target lender?

Josh: So let’s assume that you’re going to be focusing within your state so you don’t have to do a bunch of crazy registrations, then you’re forced to focus on people that you already have a prior existing relationship with. The definition of that according to the SEC and Ralph is three touches and 30 days. You have talked to them three times or had three communications, and you’ve known them for at least 30 days sometime during your lifetime. If you can establish that, you can then market to them anything you like.
What l started with was a newsletter. I created what I call “My Project 100” and I learned this from being in the financial services industry. We wrote down the first name, last, email, phone and physical address of everybody that I knew and I started a little two-page newsletter to all those people and we started to educate them about self-directed IRA’s and private lending for real estate and would start giving them cases studies of deals that we were doing or deals that we were wanted to do. Because we knew them, we could tell them what the offer was. We could tell them that we paid 13% fixed return or we were going to give them 15% of our profits. So that is where most people start and if you have that prior existing relationship you can then market to that group of people.

Mike: Okay.

Josh: And it could be anything. I would send out and start with a little newsletter. I hired a graphic designer on oDesk, I hired a writer from oDesk, I got a logo from fiverr.com, started really, really inexpensive and created a little newsletter and started sending it out to people. Then people would say, “Hey, Josh,” I’d see them social functions and we’d talk on the phone. “Hey, Josh, got your newsletter. This looks awesome. What are you up to?” I would say, “Well, I’m investing in real estate. I’m raising private money with private investors and I pay my investors a fixed double digit rate of return.”
I had a little elevator speech I would use. They would say, “Josh, that’s awesome.” Then I would go on and my thought, Mike, is I never ever put someone in the hot seat. I never would’ve talked to one of my friends or family members or somebody in my social network and be like, “Hey, will you be one of my private lenders?”

Mike: Right.

Josh: I would never do that, what I would do is I would say, “Hey, let’s go grab a beer. Let’s go grab a coffee and let me just show you what it is that I am up to in case you run across somebody who would ever interested in real estate and buying or selling or private lending.”

Mike: Right.

Josh: Take them to lunch then I would show him what l do, walk him through case studies, show them how we generated a 12, 13, 15% return and what’s awesome, Mike, at the end is they would always say, “Hey, what about me?”

Mike: Right. Self select.

Josh: It is self select, yes, absolutely. They would say, “What about me? This sounds awesome. I would like to give this kind of return. What about me?” or, “Hey, my dad, I think, would be interested in this,” or my whatever. So it was just education-based selling.

Mike: Sure.

Josh: Total non-pitchy and inevitably I just started recruiting money and recruiting money and getting referrals. Then I got to the point where we wanted to do a big federal registration so we could advertise all over the country.

Mike: Yeah. Josh, I think you’re going to probably agree with me here. A lot of people that might be listening right now have never raised money and what they are they thinking about is how hard it is to kind of get started, but I think you probably agree with me when I say that, once you get started, it’s very easy to raise far more money than you’d ever need, which is another big problem because you’ve got people that are like, “Well, I thought we were going to act together and I thought I was going to get this return.”
For example, personally, I have access to more capital than I could ever need. I have had to literally turn banks away or private lenders because I just don’t need the money. You don’t want to start that relationship with somebody and they’re thinking, “Well, we’re going to work together and I am going to get a 10% or 12% return,” and I’ve got $3 million to apply or let’s say my $1 million and you’re like, “That’s great but I only need $100,000 right now. Can you put that other $900,000 in the account and let it sit there for me in case I ever need it?” which obviously now instead of earning 10%, they’re earning maybe 1% a year back to that anyway because most of their capital is not deployed. So how do you balance from getting started to raising too much money that you don’t need and you can’t apply?

Josh: Yeah, that’s a great question. All I can tell you, Mike, is what we actually did and what we actually did was I got to that point, had more money than I needed, and I thought about, hey, what is the biggest challenge for most real estate investors – they don’t have access to funding.

Mike: Right.

Josh: So I saw an opportunity to get in a situation where I can provide funding for real estate investors and we have about 300,000 subscribers all over the US and all over the world and we have a number of thousands of students in our training programs and I thought that’s what they need. So what we actually did is that we created a private equity fund where we actually raised capital into our private equity funds from investors all over the US, all over the world, and then we actually create, underwrite and originate loans to our students.
So we have investors that can do two things. They can make an investment into the fund. The fund produces a variable return based on the investments in the fund, or we have investors that can do what is called one-off loan where we underwrite and originate a deal with a student. It is a great deal. It’s that less than 65% of the after repaired value, it’s a good borrower, it’s a student of ours, it’s in a good area, low crime rate and we offer and package that loan and somebody can come in and be what we call a direct one-off investor.
So that’s an opportunity or option, I think, for just about anybody. If you’re in the fortunate position to have raised more capital than you need, good god, there are so many business out there, real estate and otherwise, that need money. You have to find a way to make that an opportunity for yourself and be able to provide funding for other people.

Mike: Absolutely. Awesome. Well, Josh, I’ve got just a couple minutes of time left here. It’s an exciting topic. I love talking about this stuff. Maybe you can share, just kind of summarize, if folks are looking to get started, where they go and I know that we talked about, depending on the level that they need to raise, basically maybe they can do that within their state without a whole lot of federal regulation. But maybe just for those that are looking to kind of get started and take it to another level, where they should start?

Josh: Yes. You know, honestly, I would start by talking to Ralph Sherman. Ralph is a great guy and he is available to kind of anybody that I send his way. He can even just walk them through very quick for free what is the even state requirements. If somebody is going to just start raising their first $100,000 or their first $500,000 or their first million. So, Mike, I don’t mind if you want me to give out Ralph’s information.

Mike: Sure, if you want to give it, I will put it on the page as well. Go ahead.

Josh: Cool. So Ralph Sherman from St. Clair Shores, Michigan is licensed to practice securities law all the way up to the Supreme Court and his website is shermanlawoffices.com and I am sure his phone number is also on that page. I’ve also worked with another great securities lawyer in California named Anthony Geraci, is a great one. A lot of other real estate professionals that I know also have talked to Anthony. Anthony also runs a national organization, I think it is the American Association of Private Lenders something like that.

Mike: Okay.

Josh: Anthony has an influential role there. But even if they’re just going to get started with their state, I would highly recommend they talk to somebody like that just so they know, “Hey, what do l need to do in my state if I need to raise $500,000?”

Mike: Yes.

Josh: The second thing l would do, is I would brainstorm. I would go through my smartphone, go through my email, go through all my contacts and think about who are all the people that I already have a prior existing relationship with that I could talk to, not because they are going to invest, but because they might be able to refer you to somebody or they might be able to cheerlead for you? Hopefully if you talk to them, they’ll say, “Hey, what about me? I want to invest with you.”

Mike: Sure. What about people that don’t have a track record?

Josh: Sure.

Mike: Yes. You kind of mentioned that, maybe that is better for an equity participation type play until you get some experience.

Josh: That is right, that is right. I raised my first $60,000, actually, my $150,000, Mike, before I ever did a real estate deal. I actually finished one wholesale deal. I talked to a woman who was a friend of a friend and she was recently divorced and she is at the gym, right, on the treadmill all the time and I just kind of knew her. I would just be on the treadmill, talking, and she says, “So what are you up to?” And I would say, “Well, I am getting out of financial services business and I’m going to invest in real estate full time and we are looking to raise private capital and I’ll pay my investors 18% return.” She said, “Wow! I’ve got $60,000. I will give it to you tomorrow for 18%.”
She did and then she ended up giving us another $90,000 about six months later. That second investment was at 10% return. So, yeah, I would be in a position to understand what is going on in the mind of your private investor. They are thinking risk/reward and so if you’re only willing to offer 8% return and you have no experience, That’s going to be tough because they can get 8% somewhere else with somebody who has experience.
I think it is also a matter of just how professional, even if you don’t have a lot of experience, how professional you make yourself appear – business cards, flyers, collateral, talking about listening to this podcast, FlipNerd, what you’re leaning about real estate, what you’re doing. The other thing is just getting a second opinion from an appraiser or an inspector or a hard money lender that might look at your deal and say, “Hey, this is a great deal.” Getting another opinion from somebody outside, a third party . . .

Mike: Absolutely.

Josh : . . . is a great way to package that up to a private lender and say, “Hey, look, this appraiser says the after repaired value is $200,000 and I can buy and repair this thing for $130,000. Look at all this equity. This is a no-lose situation.”

Mike: Right.

Josh: And get a third party to help you out.

Mike: Yes that’s great. Well, Josh, if folks want to learn more about what you’re doing, I know you have some programs where you teach people how to raise money and how to invest and other things, where should they go?

Josh: Sure. So really two spots, our main core website where they can download one of our free reports. One of the free reports I’ve written which is our most popular is How to Quit Your Job in 90 Days Flipping Real Estate. They can download that for free at strategicrealestatecoach.com. Our most popular blog where we have the most interaction and we have a number of six free videos and couple of free reports that, again, they can get for free is 40kflips.com/blog. There’s over 1,500 Facebook comments on that page, there is lots of free materials. They can catch us in either one of those spots.

Mike: Awesome. We’ll have those links down below the video for those that are listening right now. Josh, hey, thanks so much for you time. They definitely appreciate it.

Josh: All right, Mike. Thanks for having me on.

Mike: Good seeing you again. We’ll talk to you again soon, my friend.

Josh: You got it.

Mike: All right, bye-bye.
Thanks for joining us for today’s flipnerd.com podcast. To watch or listen to more great shows please visit flipnerd.com or visit us in the iTunes store. To access the most robust social platform in existence for real estate investors, where you can find off-market wholesale deals, great vendors literally in your market, and to socialize with other like-minded individuals, please visit the one, the only, flipnerd.com.
If you’re not yet a member, you can set up a free account in about 30 seconds. It’s pretty much the coolest site that has ever existed in the real estate investing industry so get on over to flipnerd.com.