Most newbies who want to get their feet wet in the world of investing think they need lots of up-front cash to get started. They say they’ll start investing in real estate when they’ve enough money saved up in the bank. They never thought about Raising Money for Multifamily Real Estate.
That couldn’t be further from the truth. If you want to raise money for investment, your first point of call should be friends and family and of course investors. And with good reasons:
The Benefits Of Raising Money for Multifamily Real Estate
Get started immediately. With investors on your side, you don’t need to use much of your own money, which means you don’t have to miss out on today’s investment opportunities.
Go for more, better, and bigger deals. Good Multifamily deals are a dime a dozen. When you have funding from numerous investors, you have a higher chance of closing on better and bigger deals with higher returns.
Leveraging Other people money to scale your business to generate more income.
Now, the bigger question is: How do you start with Raising Money for Multifamily Real Estate from investors?
Here are 5 secrets and tips that will help to make raising money for investing easier and more hassle-free.
Leverage a Sample Deal Package
If you’re a beginner investor, the chances are good that you don’t have the kind of credibility and credit that traditional lenders and funders are looking for. Even still, you can get investors to financially commit if you have created a solid Sample Deal Package (SDP).
An SDP is a document that covers every aspect of your investment deal. For instance, when investing in an apartment building, it should include the following information:
- The Location
- Apartments unit mix
- Photos
- Potential returns
- Projected Proforma
- Actual financials
- Funding Plan
- Management Plan
- Repositioning Plan / The upside
- Exit strategy and timeframe
A good SDP gives you talking/selling points you can use to show potential investors why they should invest with you. It also allows you to have a more holistic view of your deal, as well as get investors to make financial commitments.
The first step in setting up a Sample Deal Package is to get your hands on the marketing materials for the building in question. Next up, you need to create projected financials, returns, and more.
To recap, Your SDP should be broken down in to sections that may include a short bio of yourself, about the management team, potential returns & projected financials, an executive summary, and property info.
Get in Touch with your Connections
Finding potential investors won’t be an easy walk in the park. That’s why you need to go through your phonebook and talk to nearly everyone you know, from your friends and family to neighbors and colleagues.
There’s a good chance that they may want to invest in your deal. Some may not be interested but actually know an investor who might give you money.
When talking to your contacts, be sure to mention the key selling points, including expected returns. The trick is to get as many one-on-one meetings as possible.
Remember you’re the Biggest Risk
When you eventually get an in-person meeting with a potential investor, you need to put your best foot forward. Remember you are the biggest risk, and for good reason.
First, the investor may not know you that well. Secondly, they may not trust you yet. As such, your first job is to build rapport with the investor and make them as comfortable with you as possible.
Kick off the conversation by talking about yourself, and paint your life in the best possible light. Show the investors that you have what it takes and that you are the right person to put their faith in, and give their hard-earned dollars.
Put your Investment under a Limited Liability Company (LLC)
How to best set up your investment boils down to several factors like its complexity and size. No matter how you structure it, you should always put your investment under an LLC, and not your name.
An LLC will shield you from financial risk. If your investment (say an apartment building) is sued or fails, the liability or losses won’t carry over to your personal finances and other financial assets.
How to Raise Money for Due Diligence Costs?
You may need to do some due diligence before you are able to convince investors and raise money for your investment. For example, you may need some funds to evaluate the actual financials of your potential deal.
The best way to pay for these costs may be a low-interest credit card, borrow from friends/family, or partner with an existing investor.
Conclusion
You don’t need to have your own money to begin investing in a commercial property like apartment buildings.
Use these 5 tips to raise money quickly and more effectively for your investments.
Disclaimer: The Information provided here is for general education only. You must seek professional legal advice, especially concerning the U.S. Securities and Exchange Commission laws. Federal and State securities laws may differ by state or the nature of the transaction.