People tell me their biggest objection to getting started with multifamily property investing is the lack of money. They say they don’t have enough money or credit and so they sit on the sidelines.
The solution? Raise money from others.
While you may agree that this might be the way to go, you might be saying, “that’s all well and good, but I don’t know how to go about raising money”. You might point out that you can’t start looking for deals without money (“who would take me seriously”), and if you were to put a building under contract, there’s no way you would be able to raise money in time.
And so you’re stuck.
Let me propose another, better way. I’m going to reveal a secret that is so powerful it will stun you with its simplicity.
Here is the #1 Secret: Make Up a Deal
The secret to getting out of the “catch 22” I just described is to make up a deal. That’s right, just make one up. Then use it to talk to potential investors. How do you make up a deal? Look for an apartment building for sale and request the marketing and financial package. The building should be in the area and about the size you’re looking for. Using the listing agent’s marketing package, create an investor package. Use the reported income and expenses to come up with your own projections. Talk about what kind of assumptions you’re making and what kind of returns that might translate to.
Once you have your Sample Deal Package, you now have something to talk with potential investors about. Tell them that you’re raising money for an apartment building, and that while you don’t have one under contract right now, you wanted to review one that looks substantially like it.
The second secret to raising unlimited money for your apartment investing deals is to talk to everyone you know. Don’t discriminate anyone, not even your best friend who’s still living at home with his parents. You’d be surprised by who people know. Talk to friends, family, relatives, neighbors, co-workers.
Tell everyone you’re looking for investors to buy an apartment building. Say that you’re projecting a 12-15% average annual return and the minimum investment is $50,000 (just an example). “Do you know anyone who might be interested in something like this?”
Your friend might say something like “No, not me, but my brother is into stuff like that, I’ll introduce you to him.” Then follow up with every introduction. When you meet that person, regardless of the outcome, ask for another introduction.
If you create a Sample Deal Package and talk to everyone you come in contact with about it, you are well on your way to raising as much as you need for your commercial real estate deals.
Written by: Michael Blank