CREPN # 157 – How to Attract Capital and Communicate with Real Estate Investors
WHO ARE YOUR POTENTIAL REAL ESTATE INVESTORS?
To be successful in real estate investing, you will need to look for ways for acquiring capital. If you are syndicating, you should be able to look for potential investors for your LLC. For this, you will need to focus on getting capital from your circle of influence.
The easiest money usually comes from those who are closest to you. These people know you and most likely will support you if they believe in the opportunity you are presenting. Remember: Chemistry and trust help build strong bonds.
The next closest group of eligible investors will be your acquaintances. Again, these people know you and are likely to support you.
Now, that you have introduced your investment opportunity to your closest circle, it’s about time to check with your business associates. These are the professionals you know that have a retirement account and will likely to invest these funds for passive income. Being able to pitch your syndication idea to them can help you form a solid syndication of eager investors.
THE OPPORTUNITY FOR REAL ESTATE INVESTORS
The key to attracting capital is by communicating the opportunity to your potential investors. You can easily do this with a “credibility kit”.
This is where you share with potential investors the knowledge you have acquired. You should be able to introduce your investment team, and the criteria you will use for selecting a property. The goal is to convey to the investors that they will not lose on their investment.
You will also need to educate investors on why investing in an emerging market is a sound decision. For that, explain what you know about the growing demand for multifamily, job growth and the opportunity to increase rents.
WHEN TO ATTRACT CAPITAL
You can never start early. Investors might pull out at the last minute. You need to have a long list of potential investors that can fill up the space at any time. A deal is not a deal if you don’t have the funds to close.
Vinney has overcome the issues of investors backing out or not having enough money to close. He does this by offering investors 2% of their funds on the start date of their deposit until the asset is acquired. This guarantees closing and provides the lenders assurance that the down payment is available.
Another important rule is to keep records. Vinney recommends a spreadsheet wherein you can identify the goals and dreams of the investors and record the dates and what you’ve discussed.
Your ability to close deals will raise your stature with the real estate brokers in the market. The more deals you close, the more deals you will be presented.
COMMUNICATING WITH INVESTORS
Vinney recommends regular, constant communication with investors. He leverages technology with VoIP calls, webinars, videos, emails, etc. As a result, only five investors were able to visit their investment properties throughout a 12-year period.
When you have constant communication with your investors, they’ll feel comfortable and there’s a big possibility that they’ll share with their friends about the good job that you are doing. This opens up new opportunities for you in the near future.