May, 2013

5 Keys for an Effective Presentation to Private Money Investors

Holy GrailPrivate Money is quite honestly the “Holy Grail” of real estate investment capital.  There are a number of ways to creatively fund your real estate deals, whether owner financing, hard money…or just your good ol’ fashioned mortgage.  But those funding sources can only take you so far, and don’t always fit into every deal.  Some sellers don’t have the ability or desire to owner finance, hard money loans are very short term and charge astronomical points and interest, and even people with great credit can only have a few mortgages at a time.  The funding source with the greatest flexibility, which in turn allows for the greatest opportunities, is private money.   And that’s why everyone wants it.

I’m asked all the time if I will give out my contacts for private money, and my answer is always a resounding “NO”…and for a very simple reason.  As I explained in my last blog post (“How Do You Find Private Money for Your Real Estate Deals”) private money lenders are “relationship” investors.  They’re not necessarily investing in a piece of real estate, but rather in me as a person, because they “know, like, and trust” me…and that trust is not transferrable to another party.

If you search “how to get private money” on the internet, there are a plethora of self-proclaimed “gurus” who are dispensing advice on the topic.  Many of the so-called “experts” continue to recycle the same old worn-out ideas that Carlton Sheets and Robert Allen were pitching in the 1980’s, encouraging their students to hold luncheons with high net worth individuals.  Trust me, trying to “pitch” a room full of strangers to give you their money is an idea doomed from the start, and a perfect recipe for failure.

 Those who know what they’re talking about will emphasize the role of building relationships first, and letting the private money discussion flow out of a conversation that develops naturally, without being forced.  However, when the big moment does arrive, and the door is open to make your presentation…here are a few tips to make sure you don’t blow your big opportunity.

1.) Practice Your Speech – It may sound cheesy, but I would recommend looking at yourself in the mirror, and practicing what you’re going toSpeech Mirror say.  Unless you are just an incredibly gifted, quick-on-your-feet speaker, don’t think you can just “wing it”.  You’re asking a person to put their hard earned money at risk, so you’d better come across as confident and well-spoken, or you can kiss that money goodbye.

2.) Create a Success Binder – Private money is much easier to secure when you have a compelling story to tell.  If you’ve never done a real estate deal in your life, it’s obviously going to be more difficult to convince someone that your business is the right place to stash their cash.  It’s a good idea to joint venture with an experienced investor first, in order to get a couple deals under your belt.  Then you can create a binder with before and after pictures of your renovations, along with the length of time for each project and the overall profit numbers.

3.) Calm their Fears – The SECOND question in every investor’s mind is how much money they will make.  The first question in their head is always, “Will I get my money back?”  Make sure you explain to them how they will be protected against financial loss, such as the fact that their investment is secured with a note & mortgage, and that the LTV’s will never be over X%.

4.) K.I.S.S. – Keep it Simple Stupid – A success binder is one thing, but don’t go overboard with a bunch of graphs, diagrams, and real estate lingo that the iChillaxnvestor won’t understand.  You certainly want to be armed with information and data if the investor asks additional questions, but if you overwhelm them with too much, too fast…they will undoubtedly back away from the deal.  If a person either a.) gets too many choices b.) gets confused by the information, or c.) doesn’t understand something, they have a built-in defense mechanism that causes their lips to form the word…”Nooooo.”

5.) Chillax – My kid’s favorite new word is “Chillax”, which is a combination of the words “Chill” and “Relax”.  It may be a goofy word, but it’s terrific advice when it comes to making your private money presentation.  There’s no room for fear at the table with you, and if you come across as nervous or unsure of yourself, the money-man will smell it and squash the investment.  Be prepared, know your stuff…then take a deep breath and let it rip.

For more real estate investing news and information, click here to “Like” our page on Facebook, and click here to “Follow” us on Twitter.  You can also read more about the Professional Investors Guild at www.professionalinvestorsguild.com

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How Do You Find Private Money for Real Estate Deals?

Ask the Pig

Question:  Do you know of any local private money lenders? 

Keith H. – Navarre, Florida

That’s a great question, Keith…and you probably won’t like my answer.  Yes, I do know of some, but I won’t give you their names.  And to understand my answer, and why I would be so protective of my personal lenders, you have to understand the nature of private money and the difference between it and what is often referred to as “hard money”.

Traditional financing (FHA, VA, conventional) is both “borrower-driven” and “property-driven”, in the fact that both the borrower and the property have to qualify for the loan.  The borrower has to have a good credit score, a sufficient down payment, and a low enough debt-to-income ratio, Money Housewhile the property has to appraise for the contract price, and not have any major repairs or renovations needed.

In contrast to traditional financing, hard money is almost exclusively “property-driven”, which means that the borrowers finances or credit history don’t play as large of a role in the approval process.  The lender uses the value of the property, and the loan-to-value, as the main criteria for approving the loan.  The lender wants to make sure that in the case of default, there would be sufficient equity to foreclose on the property and re-sell it for a profit (or at least get their money back).

In the crash years of 2007-2009, hard money became either non-existent or had more stringent “borrower” qualification rules, however good ol’ fashioned hard money is coming back into the marketplace as the economy improves.  The down side to hard money is that it is very expensive, many times costing 5-10 points (5-10% of the loan amount in fees), as well as 12-15% interest during the life of the loan.  The positive side to hard money is that it is readily available, and can be obtained by those with less-than-stellar credit histories.

Private money, on the other hand, is the absolute holy grail of creative real estate financing because it is neither “property-driven” nor “borrower-driven”, but rather “relationship-driven”.  Private money lenders loan money because they believe in the individuHandshakeal person, and the presentation that they have made in regards to the returns that they can provide based on a track record of successful investing.  That is why I wouldn’t share my private money contacts with another investor, because that particular private money lender is investing in ME, more than he is in a property or credit score, and that trust is not easily transferred to another individual.

If you want private money, you have to go out there and hustle it up.  Yes, there is in fact W-O-R-K involved in becoming successful, and you will have to convince people to buy into your vision.  The quickest and easiest way is to put together a business plan, and present it to those closest to you who have money to invest.  They already know, like, and trust you…and know your character and integrity, so it’s one less barrier you have to overcome.

However, if you are a brand new investor, you may find that it’s a lot easier to just stick with wholesaling, joint venturing with experienced investors, and/or use hard money until you get your proverbial “feet wet”.  You will find that it’s a lot easier to get private money, when you have a story to tell.  Just the other day, I was having lunch with a high net worth individual, and he was asking me questions about my investment business.  By the end of our chat, he had offered me $100,000 to invest in my business, based primarily off my recent successes and “my story”…which you must take the time to build for yourself.

So, there you have it…a crash course in the world of creative real estate financing.  Want to learn more, and get a list of hard money lenders for your real estate deals?  Then join us at next week’s fr.ee workshop, “Flipping Houses in Today’s Market” at the Pensacola Civic Center.  Register now by clicking here!

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Entrepreneurial Moms

Being a mom is certainly no easy job. Helping kids get up, dressed, fed, and off to school is just the very beginning. Most moms also have the unenviable task of preparing a dinner, helping with homework, and getting the kids back off to bed so as to start the whole process over again. Of course when you have a terrific husband (like yours truly), the load is a little easier to handle, but still an exhausting task nonethelesBillionaire Moms.

However, the responsibilities of a mother should never be used as an excuse to not pursue her dreams. Whether a mother has a passion for renovating homes, business, ministry, or philanthropy, her goals should never be shelved or put on hold for anything or anyone. Moms should be given the same opportunity for achieving greatness in their life as anyone else.

I recently ran across this article about Billionaire Moms, and a number of these massive fortunes were self-made by hard-working, high-achieving, maternal superstars. These ladies didn’t let fear or anything else get in their way of success.  I hope all the mothers out there find inspiration and a new sense of desire as you read about the tremendous achievements of these super-moms!

http://finance.yahoo.com/blogs/daily-ticker/world-richest-moms-151301699.html

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Flipping Houses You’ve Never Seen?

Creative real estate investing is one of the most exciting businesses to be engaged in, and some of the deals I’m able to do without any of my own money or credit absolutely boggle my mind.  In fact, they would be somewhat unbelievable if I weren’t seeing it happen first hand in my business on a daily basis.  One of Hilburn2those mind-blowing feats involves flipping houses that you have never seen, something I’ve been able to do a few times already this year (2013), each time with a healthy $10,000+ profit.

My most recent success story is located at 7821 Hilburn Road in Pensacola, which we flipped about 2 weeks ago.  We purchased the home for $84,500 and resold it just 2 days later for $105,000 to a cash buyer, and (after closing costs) walked away with a profit in the neighborhood of $11,000.  The home (pictured) was a 4 bedroom, 3 bath home built in 1970 on the Northeast side of Pensacola with over 2000 square feet.  Well, that’s at least what they tell me about it, because again…I’ve never set foot inside of the home.

The key to flipping houses you’ve never seen is all about surrounding yourself with a good team.  One of our P.I.G. members found the lead, and sent it to me, pocketing a nice $2,000+ check for themselves in the process, and they too never saw the house, or put any money down, or had their credit checked (see how easy this is?!?).  My real estate agent met with the sellers and took pictures of the property, and helped secure an end-buyer, making it unnecessary for me to ever view the home (other than pictures).

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The Role of Fear in Real Estate Investing – Friend or Foe?

Entrepreneurial Moms
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The Role of Fear in Real Estate Investing – Friend or Foe?

fearSome of today’s most prominent thought leaders espouse the idea that fear is the only thing keeping you from success. While that may be true in many people’s lives, fear oftentimes gets an undeserved bad rap.  Fear is not always a negative thing, as it’s a mechanism used to keep us from doing things that harm ourselves.  I want my kids to be afraid of being run over by a car, because it makes them look both ways before they cross the street.  Most of us are afraid of being mugged and beaten, so it keeps us from walking down dark alleys at night or going into bad neighborhoods.  In fact, fear was one of the main reasons for my success as an athlete in my teenage years.

Robert Kiyosaki is well known for his book entitled, “Rich Dad, Poor Dad” where he points out the differences between his real father, who was poor most of his life, and a friend’s dad who was wealthy, and taught him some fundamental truths about success.  In my life, the story was more like, “Crazy Brother, Scared Brother”.  My older brother and I both pole vaulted in high school, and I went on to compete at a division one college.   For those of you unfamiliar with the sport, the pole vault is a track and field event which consists of running down a runway at full speed with a 13-15 foot fiberglass pole in your hands, jamming it into the ground, turning upside down, and propelling yourself into the air.  Needless to say, it’s somewhat of a dangerous sport.

My brother has always contended that you have to be “a little bit crazy” to be a pole vaulter, and with him that was certainly the case.  He had noPole Vault concern for his own safety, and pole vaulting just fell right into place with his life of adventure, which also included skate boarding and crawling through tunnels.  In contrast, I was very conservative, a straight-A student, and DEFINITELY not a thrill seeker.  Yet out of the two of us, I had much greater success in the event.  So what was the secret to my success?  Fear.  While my brother competed with reckless abandon, I was afraid of getting hurt, so I spent countless hours on perfecting the fundamentals like form, speed, and footwork, because I knew that one misstep could lead to serious injury or in some cases death.

Starting your own business, or getting started in real estate investing, is much like pole vaulting.  Too much fear is NEVER a good thing, as it causes paralysis, and will keep you from doing anything.  However, a little bit of fear is healthy, because it drives you to pay careful attention to your business plan, making sure you are adequately capitalized, and that you run your numbers before ever committing yourself to a deal.  Fear will force you to take calculated risks, so as to mitigate or minimize any possibility of financial loss.

On the other hand, too much fear can keep you idle and on the sidelines, and that mindset must be avoided at all costs.  In a recent survey by TNS Custom Research, 51% of Americans said they would like to be self-employed, however many of them didn’t take the steps necessary to achieve those dreams.  38% cited the fear of going bankrupt as the number one reason they never took action, 37% cited the fear of an irregular income, 15% said they didn’t have enough capital & 8% said they lacked the necessary skills.  While some of these are legitimate concerns when starting a business, they should never stop you dead in your tracks.

Investing in Real EstateThe beauty of real estate investing is that the majority of these concerns can be overcome by simply choosing a niche that fits within your level of risk tolerance.  You can’t go bankrupt wholesaling properties, because you never take title to the property and never have to use your own money.  You don’t have to worry about not having capital for many short sale flips, because transactional funding is plentiful for same-day closings, and doesn’t have any credit or income requirements.  You don’t have to worry about an irregular income with real estate investing, because it can be done in your spare time, and you can keep your day job until you build up a consistent income from your investing efforts.  And you don’t have to worry about not having the necessary skill set, because YOU have the Professional Investors Guild here to teach you exactly what you need to know!

If you’d like to learn more about how you can make money investing in real estate, join us for one of our upcoming meetings (everyone’s first visit is FREE).  Or, if you’re not from the Northwest Florida area, join our mailing list or follow us on Facebook, and we will keep you updated with blog posts and online webinars that can help teach you the skills necessary to get in the game, overcome fear, and start living the life you’ve always dreamed.  Questions or comments?  I’d love to hear your thoughts below.

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