Today’s REI Classroom Lesson
Michael Blank lets us in on what you need to create in order to secure financing when you have no money to start with.
REI Classroom Summary
By creating a sample deal, you’re able to analyze the deal and in turn become more confident. Connecting with your network and asking for referrals can help expand your opportunity.
Listen to this REI Classroom Lesson
Real Estate Investing Classroom Show Transcripts:
Mike: Welcome back to the FlipNerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level.
And now, let’s meet today’s expert host.
Michael: Hi, this is Michael Blanc. I’m your instructor for today’s session of REI Classroom. I’ll be talking about raising money for your next commercial real estate deal.
Mike: This REI Classroom real estate lesson is sponsored by VirtualStaffNow.com.
Michael: So here’s the situation. One of the biggest objections in getting into apartment building deals is that you don’t have your own money or not enough money. The other problem you have is, so you say you don’t have a deal under contract, so you can’t go out and raise money for it, which is true. On the other hand, now you have a deal on a contract, and now there’s not enough time to raise money, which is also true. This becomes now the biggest deterrent to getting into commercial real estate investing, which really is the best way to build long-term wealth and passive income.
How do you overcome this challenge? I’m going to talk to you about how to overcome this. This is the challenge; this is a chicken-egg problem. I’m going to talk to you about how to overcome that in such a way that you’re not stuck and you don’t use it as an excuse not to get started with apartment building investing.
So here’s the secret. The secret is to essentially make up a deal. That’s the secret. I call it a sample deal package. What you do is you go get a deal somewhere, on LoopNet.com for example, or you call a broker and you get them to send you a marketing package. From that, you create a financial projection package and then you create a package for the investors as if you had it under contract. So everything about the deal is real except for the fact that you don’t have it under contract. Now, the price might not be real. Maybe it’s a little lower than it actually is to make the numbers work. It doesn’t really matter.
Now you disclose all of this to the people you talk to. It’s not like you say, “Hey, I got this deal under contract,” and it’s not actually true. It’s used as a communication tool as you talk to investors. This does several things, this whole idea of a sample package. Number one; it gets you into the practice of analyzing a deal. It also expends your comfort zone at the same time. A lot of us are overwhelmed by the idea of buying a 20-unit apartment building, but once you actually look at a package and you analyze a package, and you kick the tires, maybe even go visit the property, you expand your comfort zone.
So as you then approach people to talk about this it’s almost real to you, because it is in your mind. Your enthusiasm and your confidence shine through as you speak to people. The real secret to solving that chicken-egg problem is a sample deal package. So that’s what I suggest that you do first.
Now, here are some tips about actually raising money, finding your investors, and how to approach them. The first thing you do is you create a mind map. Mind map is you just create a piece of paper with a bunch of bubbles on it for each social group that you’re part of. You got a bubble for neighbors, family, friends, co-workers, or maybe you go to church, or you’re part of Boy Scouts or you play sports, or whatever. So you have this whole page full of bubbles, and then you add all the names of people that you know in each of those social groups. So you brainstorm the number of people you know, and you’ll be surprised at how many people you can actually come up with.
All right, so that’s the first thing. Now, as you approach these people, what you want is you want to get a series of yeses. You don’t want to go up to them, and, “Hey, I’m doing apartment building investing and I’m looking for $50,000.00. Are you in?” Most people will go, “What are you talking about? No.” You get no’s. You don’t want no’s, you want yeses. Instead of thinking about raising money, I want you to think about really networking and expanding your network. That’s a primary goal, the secondary goal being raising money, but you get other benefits out of that as well. You could find mentors, you can find professionals like real estate agents, brokers, lenders. So really it’s about expanding your network.
The way you approach these people that you already know, say, “Hey, I’m getting into this apartment building investing. I’m really excited about it. Do you mind spending 5 or 10 minutes on the phone? I want to get your feedback.” What are they going to say? They’re going to say, “Yes, of course,” because they know you. You ask them to introduce you to as many people as you can think of. Yes, you’re looking for investors, you’re looking for a minimum. Here’s a return. You’re looking for brokers, you’re looking for attorneys. Who can you put me in touch with either that you know or that you think might know others? That’s how you expand your circle of influence. You do it with every single person.
Now, at the end of the day, if someone is interested in investing with you, if someone says, “You know, I might be,” because you ask everyone for a referral. You don’t actually ask them directly, “Hey, are you interested? Hey, do you know anyone who might be interested? Do you know anyone?” They might go, “Well, shoot, I might be interested.” In that case, if you come across someone like that, you want to schedule a one-on-one meeting, and that one-on-one meeting is when you use that sample deal package. You use it as a hypothetical. “I don’t have a deal under contract right now, but when I do it’ll look a lot like this. Let’s take a look at it. Let me know what your questions are, maybe what your concerns are, etc.”
Use that as if it were a real deal, and then when you do get a real deal, you can say, “I’m going to send you a real deal package with real numbers and real contract price, but you’ve already seen it, you’ve already given me a financial commitment, so it’s not a surprise.” That way, you have verbal commitments. What you want is you want verbal commitments from people to invest with you, so when the time comes and you actually get one under contract, you have the confidence to close on the deal.
All right? If you want to learn more about this, I have an eBook. It’s a 40 page eBook on this topic. It also goes through and has a script for conducting that one-on-one meeting, or how to structure the deal. It’s available at The Michael Blanc.com. So again, it’s www.TheMichaelBlanc.com and it’s right there on the home page for you to download.
So I hope that was useful and you use that secret to raising as much money as you need for your next apartment building deal.
Mike: VirtualStaffNow.com is the leading virtual system provider for real estate investors. As busy real estate investors, there’s nothing more valuable than our time, and VirtualStaffNow.com not only helps you find the right real estate virtual system for your business, they train them on an ongoing basis, manage them daily, and make sure they’re staying productive and effective. And in the event they’re not the right fit or need to be replaced, they handle that for you, too. Whether you need 1 or 100 virtual assistants for your team, start the process right now at VirtualStaffNow.com.
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.
Are you a member yet of FlipNerd.com, the hottest real estate investing social community online? If not, you can join for free in less than 30 seconds and get access to hundreds of off-market deals, vendors in your market to help you in your business, and you can start networking with thousands of other investors just like you. Get your free account now at FlipNerd.com.
Please check out the FlipNerd family of real estate investing shows where we host four great ongoing shows at FlipNerd.com/shows or simply search for FlipNerd in the iTunes Store.
And now, let’s meet today’s expert host.
Michael: Hi, this is Michael Blanc. I’m your instructor for today’s session of REI Classroom. I’ll be talking about raising money for your next commercial real estate deal.
Mike: This REI Classroom real estate lesson is sponsored by VirtualStaffNow.com.
Michael: So here’s the situation. One of the biggest objections in getting into apartment building deals is that you don’t have your own money or not enough money. The other problem you have is, so you say you don’t have a deal under contract, so you can’t go out and raise money for it, which is true. On the other hand, now you have a deal on a contract, and now there’s not enough time to raise money, which is also true. This becomes now the biggest deterrent to getting into commercial real estate investing, which really is the best way to build long-term wealth and passive income.
How do you overcome this challenge? I’m going to talk to you about how to overcome this. This is the challenge; this is a chicken-egg problem. I’m going to talk to you about how to overcome that in such a way that you’re not stuck and you don’t use it as an excuse not to get started with apartment building investing.
So here’s the secret. The secret is to essentially make up a deal. That’s the secret. I call it a sample deal package. What you do is you go get a deal somewhere, on LoopNet.com for example, or you call a broker and you get them to send you a marketing package. From that, you create a financial projection package and then you create a package for the investors as if you had it under contract. So everything about the deal is real except for the fact that you don’t have it under contract. Now, the price might not be real. Maybe it’s a little lower than it actually is to make the numbers work. It doesn’t really matter.
Now you disclose all of this to the people you talk to. It’s not like you say, “Hey, I got this deal under contract,” and it’s not actually true. It’s used as a communication tool as you talk to investors. This does several things, this whole idea of a sample package. Number one; it gets you into the practice of analyzing a deal. It also expends your comfort zone at the same time. A lot of us are overwhelmed by the idea of buying a 20-unit apartment building, but once you actually look at a package and you analyze a package, and you kick the tires, maybe even go visit the property, you expand your comfort zone.
So as you then approach people to talk about this it’s almost real to you, because it is in your mind. Your enthusiasm and your confidence shine through as you speak to people. The real secret to solving that chicken-egg problem is a sample deal package. So that’s what I suggest that you do first.
Now, here are some tips about actually raising money, finding your investors, and how to approach them. The first thing you do is you create a mind map. Mind map is you just create a piece of paper with a bunch of bubbles on it for each social group that you’re part of. You got a bubble for neighbors, family, friends, co-workers, or maybe you go to church, or you’re part of Boy Scouts or you play sports, or whatever. So you have this whole page full of bubbles, and then you add all the names of people that you know in each of those social groups. So you brainstorm the number of people you know, and you’ll be surprised at how many people you can actually come up with.
All right, so that’s the first thing. Now, as you approach these people, what you want is you want to get a series of yeses. You don’t want to go up to them, and, “Hey, I’m doing apartment building investing and I’m looking for $50,000.00. Are you in?” Most people will go, “What are you talking about? No.” You get no’s. You don’t want no’s, you want yeses. Instead of thinking about raising money, I want you to think about really networking and expanding your network. That’s a primary goal, the secondary goal being raising money, but you get other benefits out of that as well. You could find mentors, you can find professionals like real estate agents, brokers, lenders. So really it’s about expanding your network.
The way you approach these people that you already know, say, “Hey, I’m getting into this apartment building investing. I’m really excited about it. Do you mind spending 5 or 10 minutes on the phone? I want to get your feedback.” What are they going to say? They’re going to say, “Yes, of course,” because they know you. You ask them to introduce you to as many people as you can think of. Yes, you’re looking for investors, you’re looking for a minimum. Here’s a return. You’re looking for brokers, you’re looking for attorneys. Who can you put me in touch with either that you know or that you think might know others? That’s how you expand your circle of influence. You do it with every single person.
Now, at the end of the day, if someone is interested in investing with you, if someone says, “You know, I might be,” because you ask everyone for a referral. You don’t actually ask them directly, “Hey, are you interested? Hey, do you know anyone who might be interested? Do you know anyone?” They might go, “Well, shoot, I might be interested.” In that case, if you come across someone like that, you want to schedule a one-on-one meeting, and that one-on-one meeting is when you use that sample deal package. You use it as a hypothetical. “I don’t have a deal under contract right now, but when I do it’ll look a lot like this. Let’s take a look at it. Let me know what your questions are, maybe what your concerns are, etc.”
Use that as if it were a real deal, and then when you do get a real deal, you can say, “I’m going to send you a real deal package with real numbers and real contract price, but you’ve already seen it, you’ve already given me a financial commitment, so it’s not a surprise.” That way, you have verbal commitments. What you want is you want verbal commitments from people to invest with you, so when the time comes and you actually get one under contract, you have the confidence to close on the deal.
All right? If you want to learn more about this, I have an eBook. It’s a 40 page eBook on this topic. It also goes through and has a script for conducting that one-on-one meeting, or how to structure the deal. It’s available at The Michael Blanc.com. So again, it’s www.TheMichaelBlanc.com and it’s right there on the home page for you to download.
So I hope that was useful and you use that secret to raising as much money as you need for your next apartment building deal.
Mike: VirtualStaffNow.com is the leading virtual system provider for real estate investors. As busy real estate investors, there’s nothing more valuable than our time, and VirtualStaffNow.com not only helps you find the right real estate virtual system for your business, they train them on an ongoing basis, manage them daily, and make sure they’re staying productive and effective. And in the event they’re not the right fit or need to be replaced, they handle that for you, too. Whether you need 1 or 100 virtual assistants for your team, start the process right now at VirtualStaffNow.com.
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.
Are you a member yet of FlipNerd.com, the hottest real estate investing social community online? If not, you can join for free in less than 30 seconds and get access to hundreds of off-market deals, vendors in your market to help you in your business, and you can start networking with thousands of other investors just like you. Get your free account now at FlipNerd.com.
Please check out the FlipNerd family of real estate investing shows where we host four great ongoing shows at FlipNerd.com/shows or simply search for FlipNerd in the iTunes Store.
