In my last blog post I talked about 2 ways that a newbie real estate investor could get financing. One of those ways was by having 50 – 50 partner with a money partner who will finance the transactions.
In this article, I’m going to share how a newbie can get a money partner to finance your deals.
The real question becomes how do you convince that person who has the money and the credit to become your partner. When I was starting in real estate, I partnered up with with a CPA who became a money partner for us. Prior to our introduction to this guy, we had already done several deals. We could show him that we had real experience under our belts.
We put together a presentation with our success complete with what we paid for our properties, what we had to fix them up, and what the cash flow looked like.
It’s not essential that you know the individual personally. In fact, I was introduced to that person by a mutual friend who put us together for a fee. Was the fee worth it? Absolutely.
I don’t think we would have been able to put that partnership together if we hadn’t had experience under our belts already.
You can use this approach if you already have that type of experience. All you need to do is put together a presentation like I did that shows people you know what you talking about.
If you don’t have that experience, does that rule out this approach? Absolutely not. You can still put together a deal like this.
It’s definitely not going to be a little tougher sale, but it’s not an impossible sale. I’ve seen my clients put together this type of deal and make money doing so.
What you have to do put together a good presentation. It will need to show the types of the properties that you would be Buying. You will need to put down specific information like purchase price. What you plan to do to rehab the property. You will need to show what the cash flow will be. Get tons of specific details worked out before your meeting. For example, have your contractors already lined up and ready to go.
The one thing that’s different is that if you don’t have a track record it’s going to be a lot easier to approach someone who is family or a close friend who really wants to see you succeed.
If you go in with this type of information and a lot of certainty that you can pull this off – YOU CAN. You’ll have a good chance of convincing your potential money partner to actually become your 5050 Partner.
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May 20th, 2010 at 3:21 am
Landing your first money partner can be truly difficult if you are really new. You give some great advice for someone to get started. What city do you practice in?
May 20th, 2010 at 5:19 am
Hey Jason: I’m in Oklahoma City. You are right, finding a money partner is tough. People have been conditioned into expecting “finance” people to be anything from somewhat unethical to outright crooks. It makes our job tougher.
May 20th, 2010 at 8:10 pm
Thank you so much for these awesome articles!
You are right, it is tough to get someone to go 50/50 or even find a HML without experience under your belt. I am running into that problem right now as well… And no, I’m not giving everyone a woe is me sob story, I’m just saying things from a different perspective.
The whole reason that I first stared trying to get into the wholesale/rehab market was because I was unemployed and had bills coming due and no income and very poor credit. very poor. I was watching tv late night one night and I saw an infomercial for Dean Graziozi or whatever his name is and it sparked my interest… I never followed through though and since i was unemployeed and bills were important, I didnt have the 2599.99 to fork out for his program. I recently found bigger pockets website and I have learned sooo much, and I have found several deals that would make someone alot of money. I have been trying to get hard money loans but with no job and no credit and no liquid asset…. well you get the picture…
How does one go about finding investors? Do you just walk up to peope at the local REI club (which costs money to be a part of, money I dont have) and say hey! i got this deal and that deal and i need this much money from you and ill split it with you 50/50? If I were an investor, I would laugh. So if I know that I would do that, than what makes someone else think that it will work for them…
So, could you give someone with no credit, no job, and no liquid assets information on how to go about finding funding for deals?
Oh and im not tottally helpless either, I have a background in industrial construction and so does my parter. we can do most repair ourselves from floor to ceiling. My father in law finishes dray wall for his own company and my mother in law works at ace hardware and we get building material at cost. So, Im not helpless, but there are challenges out there that really suck… and i would like to ask all other investors out there reading this to think back to the time when they were trying to get there feet wet and make a deal and remember what the struggle was like, especially if you were in my situation and happened to luck up and come across an investor who was willing to take a cut in profit to show you the ropes
That is all… sorry for the ramble and the grammar…
Mark Powell
Future REI Tycoon
heromrk18 at gmail dot com
May 21st, 2010 at 12:42 am
“How does one go about finding investors? Do you just walk up to peope at the local REI club (which costs money to be a part of, money I dont have) and say hey! i got this deal and that deal and i need this much money from you and ill split it with you 50/50? If I were an investor, I would laugh. So if I know that I would do that, than what makes someone else think that it will work for them…
So, could you give someone with no credit, no job, and no liquid assets information on how to go about finding funding for deals?”
Mark- Yes, bigger pockets is great community to get tied into…I’m also a member. I have personally never really looked for (or found) a money partner at a REIA meeting. I’m not saying that couldn’t happen, I’m just saying it’s not my experience.
Do you have any family or friends you could approach who might have the money and be interested? If not, who do you know who might know someone who could put you together with a money partner.
I found that CPA I mentioned through a mutual friend at the place I worked at the time. Who do you know?
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May 21st, 2010 at 9:53 am
Really no one. I was in foster care growing up so I really have no family at all. But, I was able to link up with another fellow investor via craigslist who will let me birddog for him!
Thank you for replying and please keep the articles coming!
May 21st, 2010 at 4:58 pm
Scott, this is similar to what we do. It works very well once an investor has done a few deals. Buy-and-hold stock returns have been so poor over the past ten years that people are looking for alternatives.
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May 22nd, 2010 at 7:51 pm
Mark: It will probably be hard at first to raise investment if you do not have a track record or presentation of what you do. In your case, you may need to create a “portfolio” of the work you have done as a contractor and tell your future investor that you’ve been doing this work for others for years and now your ready to be on the other side.
I always recommend to new RE investors is to “birddog” the deal to an actual experienced investor (you’ll get paid a referral fee) and then volunteer some of your time so that you can go with that investor and maybe learn a little bit of the business. You CANNOT waste their time with bad deals, however, if you approach the investor properly they may actual give you some advice how to find better deals. What most experienced investors learn is that training other people to do real estate doesn’t work out time/financially unless you can make it worth it to the investor.
Once you learn how to find and analysis deals, and made a few dollars birddoging, you can then put them under contract and wholesale the deal to an investor and make 3-10K (leave the meat of the profit to the investor who is taking the risk). It’s better to get 3-10K now vs. struggling while doing a rehab, then have to resell the house and wait 3-6 months.
Once you have a few wholesales, you should be out of debt, have more experience, have additional funds now to actually buy/sell properties. You’ll want to raise private money instead of using your own funds, of course.
Of course: If you have a GREAT deal, the money or investor is easy to find. Go to your REIA and find out who is REALLY doing deals. Trust me, we wish there were more new investors brining us deals because, now, we have all the money we need to buy.
So: Birddog (gain exp), Wholesale (gain more exp), then choose a RE strategy such as retail flip, rentals, rehabs, other. Repeat: Birddog, wholesale, then other – not the other way around. Trust me.
Lastly: YOU MUST NETWORK. You MUST GO TO EVERY REIA meeting. YOU MUST NETWORK. Without networking, you will not learn and stay on top of new events.
May 22nd, 2010 at 7:54 pm
Forgot to add: You must constantly be willing to learn about real estate. You need to immerse yourself in RE knowledge. If you have no money, borrow courses, go to the library, use the internet.
Heck: Volunteer your time to an seasoned investor. If I had to START OVER, I would find the top 5 investors and work for them for FREE – and not one day, not one month, but 3+ months. Trust me, the connection, the experience, and other factors will pay off for you. New doors will open when you didn’t think would be possible.
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May 23rd, 2010 at 1:06 pm
Ron – That is some fantastic advice. Bird dogging is a great way for a newbie to gain experience and put some dollars in their pocket.
What makes it so powerful is that a bird dog work hand-in-hand with an experienced real estate investor. It can significantly shorten your learning curve.
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