Raising Private Capital
I just finished re-reading Raising Private Capital: Building Your Real Estate Empire Using Other People’s Money.
This book is written by Matt Faircloth of the Derosa Group.
I first read this book when it came out back in August 2018. However, I was nowhere near ready to take action on the lessons provided. So it sat on my shelf for the past two years collecting dust.
So far in 2020, I’ve taken down two of my own real estate investment deals (7 units) where I act as the lead investor.
If I’m going to continue acquiring assets and building out my real estate empire, I need to get better at raising capital.
These notes & action items will help me get there.
?Master the Following Before Raising Private Capital:
The Real Estate Transaction
Who is involved? Order of operations. Learn the jargon.
Be creative. Solve problems. Prepare more than the other side.
Accounting & Finance
Know your numbers. Measure twice, cut once. Learn how to create a ProForma from scratch.
Be honest about what you bring to the table. Partner with people whose skill set is complementary.
Get some transactions under your belt. As a realtor, wholesaler, or investor. Become known as a “closer”.
Don’t just analyze a property, analyze the market. What’s the value add plan? What’s the exit plan? Who is on your team? Who is doing what?
When presenting deals to potential cash providers, under-promise and over-deliver. After closing on a deal, make sure to over-communicate with your cash providers and fellow investors.
⏯Continue, Start, & Stop:
After every real estate transaction, perform a post-mortem deal analysis.
Ask yourself the following three questions and apply the answers going forward.
- What should we continue doing?
- What should we start doing?
- What should we stop doing?
?Elevate Your Circle:
Surround yourself with people who are already where you want to be.
Join a reputable Mastermind or attend a Real Estate Investment Association meeting.
If you don’t have access to these people in person, read their books, listen to their podcasts, watch their YouTube channel.
Once you feel comfortable, become an educator. You don’t really know something unless you can explain it to a 5 year old.
?Success Leaves Clues:
There is almost always an interesting story and a lesson behind how people obtain their money.
Even if the money is inherited, there might be a story of how the inheritance was built.
Success is not an accident, it is the product of an applied formula, time, mind-set and a little bit of luck. Find out what it is and apply it to your own life accordingly.
?How To Find Cash Providers:
Tier 1 - Core Group: People who already know, like, and trust you.
Tier 2 - Referrals: Ask each existing cash provider if they can refer two investors that might be interested in becoming a cash provider for you.
Tier 3 - Taking it Public: Social Media, Podcasting, Real Estate Investment Association Meetings, etc.
?Conquer Fear of Asking For Money:
These people are not investing as a favor to you. This is an opportunity for them.
You can help them build their wealth while you build your business. In today’s investment world, where the value of a stock can drop 20% because of one tweet, they need you!
?Become a Thought Leader:
Build a megaphone.
Broadcast your thoughts on business, share success stories, and caution investors through lessons learned over time.
Start your own (or be a guest on a) YouTube channel, podcast, blog.
You can also try to speak at an event.
?Create a Newsletter:
Send a brief update about once per month highlighting case studies, pipeline, new opportunities, and most importantly tips and tricks of the trade. Become a resource.
Here’s the sign-up page: SunShak.com/invest/
It looks like shit, but it will get the job done for now.
?Create a Track Record Document:
Share the details of past projects.
Try to have before and after pictures and a summary of the financials for each project.
??The Pitch Meeting:
Face-to-Face is always best. A Zoom call is a close second. A phone call should be the last resort.
Do NOT ask someone for a substantial amount of money through email or text, unless you’re sure the answer is unequivocally going to be, “Yes!”
We have two ears and one mouth for a reason. Listen more, talk less. Seek first to understand, then be understood.
Let them tell you if they’re more likely to be a debt investor or equity investor. Understand their goals and the “why” behind their investment thesis.
- Buzzwords for Private Money Lenders: Income & Security.
- Buzzwords for Equity Investors: Tax Benefits, Alternatives Investments, [Generational] Wealth-Building.
Be prepared to answer the following questions:
- When do I get my money back?
- What are the risks?
- How much of your own money are you putting into this deal?
- What if I need my money back sooner?
- How will this affect my income taxes?
- What are the logistics?
Be prepared to share the following data:
- Personal / Business Goals
- Why you’re doing this
- Track Record
- Deal Analysis
- What’s in it For Them?
Here Are My Action Items
- Create A Track Record Document
- Create A Monthly Investor Newsletter
- Build Potential Cash Provider List by Tiers
- Build A Megaphone
- Repost Real Estate Articles to Medium, Biggerpockets, Reddit
- Guest Spots on Real Estate Related Podcasts / YouTube Channels
Sooooo… you tryna invest w me? Lmk.
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