What to Offer Your Investors When Raising Money

By June 24, 2015 July 26th, 2019 Expert Tips

Flip Tip Summary

If you’re trying to raise money for your real estate investing business, Jillian Sidoti has advice for you. It would be easy to create some complicated agreement on terms, where your prospective lenders need a financial calculator to figure out what’s in it for them…but it’s important to keep it simple. Don’t miss this great FlipNerd.com Expert Tip!

Flip Tip Transcript:

Mike: Hey, it’s Mike Hambright from FlipNerd.com, and we have a quick expert tip to share with you from Jillian Sidoti who’s going to share a tip on what to offer your investors when raising money.

Announcer: This expert tip is sponsored by RealtyMogul.com, B2R Finance, and National Real Estate Insurance Group.

Jillian: Hey, everyone. What I want to tell you is that what you want to offer your investors is something simple, something they can understand and something you can explain in 30 seconds. If you give your investors too many choices on what to invest and how to invest, then they’re going to be confused. They are not going to invest. They’re not going to act. So you want to make sure what you say to your investors translates very quickly to them and they understand it right away, because if they have to do a lot of reading or a lot of math or thinking, they are just not just going to invest.

A lot of my clients use a preferred return because it’s easy to express and it’s easy to understand. So for example, I’m going to give you 8% preferred return. That means I’m going to pay you 8% on your money before I ever get paid. Really easy to say, really easy to understand.

You can add onto that, of course, and sweeten the pot, if you will, but you really don’t want to go too difficult. You don’t want to give these complicated equity structures, you don’t want to make the investor make choices, because when you start making them make choices, they just won’t choose at all.

So you want to dictate what the deal is going to be, and you want to make it as simple as possible for them to understand.

Announcer: We’d like to thank Crestar Funding, MidAtlantic IRA, and Renters Warehouse.

Mike: 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.