Newbie investors tell me they’ll start their apartment building investing career when they have money. But who knows when that will happen? And so they wait.
Or they’ll say they can’t see themselves putting a building under contract if they don’t already have the funds in the bank – who will take them seriously? Or how can they raise all of the money in time to close? And how can they get money from investors when they don’t have a building under contract? It’s a catch 22, and so they’re stuck.
Many beginner commercial real estate investors never consider raising money from other people, and I address this erroneous mindset in my article Top 3 Reasons to Raise Money for Apartment Building Investing.
Raising money for your commercial real estate deals is not as hard as most people might think.
I’d like to share with you a secret that will let you raise money from private individuals long before you have a deal under contract. And this is critical if you want to put a property under contract and close on time!
The secret I’m about to reveal means that you can get started today, right now.
The secret is so secret that I’ve never heard it revealed anywhere else.
The secret will stun you with its simplicity.
The secret to getting financial commitments from your investors long before you have your first deal under contract is to … make a up a deal.
You “make up a deal” by creating a “Sample Deal Package”, which information about a potential deal like 12-month trailing financials, your projections and business plan, photos etc. You will then use this Sample Deal Package when you meet with potential investors.
Everything about the Sample Deal Package is real EXCEPT that you don’t have it under contract! You may also change the price so that you achieve the returns you want for your investors. But in every other way, it looks a whole lot like the real thing.
But how do you create such a Sample Deal Package?
You find and re-purpose the marketing package for a listed property and turn that into your Sample Deal Package. It will contain an executive summary about the building, investment terms and potential returns, information about the building and area, photos, rent roll, etc. Also make sure you include a short bio on yourself as well as other professionals on your team (especially our property manager and attorneys).
Where do you get all of this information? One good (free) source is www.loopnet.com, which lets you search for the kind of commercial real estate deals you want to do. Download a good marketing package and get to work.
Having this Sample Deal Package does several things for you:
- It lets you visualize the deal better. Many times our mind limits our reality. Actually seeing a bigger deal on paper and spending time with it lets us see a new reality and expands our comfort zone. The more real it seems the more confidently you talk about it with others and the more your comfort zone expands.
- You now have something to talk with potential investors about. Now, when you schedule meetings with potential investors, you can talk about the specifics of a deal that will look like the real thing. I’ve found it’s perfectly adequate to have a meaningful business conversation using this kind of approach. It’s hypothetical yet specific enough to get real feedback and commitment from a potential investor.
- Get financial commitments from potential investors BEFORE you write contracts. This is so important because it gives you the confidence to put an apartment building under contract because you know you already have the investors ready to go. You’ve already met with them, they got to know you better and have become familiar with the kind of deal you want to do. Then, when you actually have a deal under contract, you send them the REAL Deal Package and ask them to firm up their commitment. You should have the funds committed within days if you use this approach!
For an example Sample Deal Package (and more tips about raising money to buy apartment buildings), please download my free eBook (just enter your email address into the form to the right).
Creating a Sample Deal Package allows you to get started with apartment building investing NOW. It lets you build trust with your potential investors long before you put a building under contract and lets you close on time.
Let me know if you have any questions or comments below … I look forward to hearing from you!