This episode is all about learning to raise money and understanding how to use other people’s money to grow your real estate portfolio. Ask any real estate investor, and they’ll tell you they have eventually ran out of their own money to invest. The most savvy real estate investors understand this hurdle and have learned how to raise money and have access to virtually unlimited capital for deals.
While I am a proponent of buying a small multifamily for your first investment property, and growing your portfolio organically, I do understand the value of raising money for deals and scaling to a meaningful passive income stream.
Let’s first start with the negatives of raising money.
- It can be intimidating to ask investors for money. The investor is investing in both you and the property, and will scrutinize both.
- Raising money requires work. You have to network, market, and constantly be looking for deals.
- There are laws that you must follow, when raising money from other people. You must understand these laws, and go through additional steps to ensure these laws are being followed.
- When you’re raising money from investors as equity partners, you won’t own 100% of the deal.
Now let’s look at the positives of raising money.
- By raising money, you can buy real estate without having to use your own money to invest.
- Raising money can increase your ability to buy more expensive properties than you could afford on your own.
- By having partners you spread the risk among more people, decreasing your exposure.
- Each deal will be analyzed by you and the investors, so the chances of missing something or incorrectly underwriting something is lessened.
- You can provide investment opportunities to investors who otherwise wouldn’t have these types of opportunities.
- You and partners can buy real estate that other individual investors aren’t able to.
Considering both the pros and cons, you can determine if raising money will support your goals.
We’ve focused a lot on multifamily investing through syndication and crowdfunding with guests like David Thompson, Brian Burke, Rod Khleif, and Joe Fairless, just to name a few. Each of these highly successful investors and professionals have realized the power of partnerships and raising money, and have strategically grown their businesses through such.
Raising money can drastically increase your ability to buy real estate. It can open up a new world of opportunities. The question for most people is when, not if, they’ll start raising money.
Here are a few actionable steps for those interested in starting to raise money:
- Build a network of potential investors. These people don’t have to be traditional real estate investors. They can be family, friends, co-workers, or other people who you see or talk to.
- Always tell people about what you’re doing. This can be done with a polished elevator pitch. When the opportunity for small talk arises in a social setting, at work, or in passing with acquaintances, have that elevator pitch in your back pocket.
- Analyze as many deals as you can. This practice will help you be able to quickly and more easily analyze deals in the future. You’ll need some type of calculator or spreadsheet. If you don’t have one, you can find one online or build one yourself. I’ve tried a lot of them, and I personally prefer the Syndicated Deal Analyzer by Michael Blank. It’s a paid product, but has invaluable to me.
- Create a sample deal package, with the details of a property and the deal, and use it to talk with investors about. This doesn’t have to be a real deal, but can be one similar to your target deal.
These few things will get you started on the path to raising money. Syndication is the top of the real estate game, and will require a lot of hard work and dedication. The reward though can be great. As with anything worthwile, it takes learning, practice, and dedication.
Get out there and start laying the groundwork for your real estate empire. Before you know it, you’ll be a successful real estate syndicator, providing great investment opportunities and building wealth for both yourself and your partners.