| Cash is king in commercial real estate investments | | | | marketing activities for your business. From my |
| especially since the sub-prime meltdown. Even hard | | | | experience, one of the easiest places to find |
| money lenders are screening borrowers more | | | | investors is the local real estate club. Just request a |
| carefully these days compared to past years and | | | | few short minutes at the end of meeting to talk |
| quite frankly, loans aren't as easy to come by. This is | | | | about the deal you're working on. You can also work |
| where private money comes in. | | | | real estate investment forums as well as angel |
| Private money is money obtained through private | | | | investor websites for investors. |
| investors such as business people, lawyers, doctors | | | | Key Action #2: Have a Business Plan |
| and even you and I. Believe it or not, there are many | | | | Commercial real estate investments (or any |
| people who are looking for higher yielding returns on | | | | investments for that matter) are not deals you want |
| investments. These investors want to earn more for | | | | to present unprepared. Have a business plan prepared |
| their investment dollar compared to what they've | | | | and ready to share with your potential investor. At |
| been getting in money market, bonds and stock | | | | the very least, you'll want to share the purpose of |
| market returns and they are turning to real estate | | | | your project and what your goals are. You'll also |
| investments as their prime opportunity. | | | | want to present information on how the money will |
| First off, let me just say that if the idea of finding | | | | be used and what the investor can expect from the |
| private investors for your commercial deals scares | | | | deal. You'll also want to present your investment |
| you, I completely understand. But don't let that stop | | | | strategy. |
| you from reaping the benefits of utilizing private | | | | Key Action #3: Have a Hook |
| money. One reason that private money is one of my | | | | If you're serious about finding private investors, you |
| favorite funding sources is because you can still get | | | | need to have a hook - you must know what their |
| the money without the challenges of dealing with the | | | | needs are. Are they looking for short term or long |
| banks lending process. Basically, there are no credit | | | | term returns? Are they looking for equity or cash? |
| checks to endure. You can get the money fairly | | | | What is their fear and greed level? Most importantly, |
| quickly and there is virtually an unlimited supply of | | | | does the deal match their needs? Knowing these |
| funds. You are only limited by the number of private | | | | factors will provide you with a hook so that you can |
| investors you want to utilize. | | | | close the deal. |
| There are two types of private money that you will | | | | Find your investors and find your deal. Working with |
| use in your commercial dealings - equity partnerships | | | | a pool of private investors mean you could potentially |
| and debt partnerships. Equity partnerships most of | | | | have an unlimited and recurring supply of funds. For |
| take the form of the private investor funding the | | | | that reason, you'll want to be prepared to work with |
| down payment and any closing costs incurred. In this | | | | private investors by having a business plan. You'll also |
| type of partnership, you work on finding and | | | | want to tailor that plan to your prospective investor's |
| negotiating the deal. Any profits generated are then | | | | personal needs. Remember, that private money is |
| split. Equity partners are generally given a chunk of | | | | not an elusive opportunity reserved for the mega |
| the profits. With debt partnerships, private investors | | | | stars of real estate. Instead, know that anyone can |
| are given a fairly good interest rate for the use of | | | | get private money, but it will take getting started |
| their money in the deal - typically 10% - 15%. This | | | | first. |
| second type of private money also takes longer to | | | | Discover how you can start investing in real estate |
| raise funds because the return isn't as high as with | | | | from someone who started investing in real estate |
| equity partners. This form of private money is also | | | | while renting a one-bedroom apartment to being the |
| considered as a debt and must be paid before profits | | | | owner of more than 7,500 units spread out across |
| are split with any equity partners you may be | | | | the beautiful US. |
| working with. | | | | I bet you would like to know how I manage all my |
| We're just skimming the top of the potential of what | | | | properties? Want to know how to start investing in |
| private money can do for your investment career. | | | | real estate with little money? Like I said I started at |
| Investors have many options on how to use private | | | | the bottom and I am very thankful to be where I |
| investors in their deals, but the first step is to get | | | | am today. If I did not have the knowledge and the |
| started. Here are a few key actions to help you get | | | | help I am not sure where I might be now. Let me |
| started. | | | | show you how I manage all my 7,500+ units so that |
| Key Action #1: Build a List of Private Money | | | | you can do what you want, with whom you |
| Investors | | | | want...however you want! |
| Lumped into building a list are networking and | | | | |