How to Use Private Money – (Elite)
Welcome to “Module 1 – How to Use Private Money – The Big Picture”.
It is HIGHLY RECOMMENDED that you go through these modules in chronological order as they each build on subject matter from the previous modules.
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Private Money: Will Your Deal Attract It?
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Want private money? Well, as you might have figured out, you can’t just walk up to a potential private lender, tell him or her about your “deal”, and expect them to write a check. No way. If you want to be successful in raising private capital for real estate, you have to learn how to “attract” private investors to you. |
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So what’s the secret? Or to paraphrase a famous movie title: “What do Private Lenders Want?” The short answer is: put yourself in the private lender’s shoes, and think about what you would want before you invested your children’s inheritance is some real estate deal.
Now, what I’m about to tell you may shock you. It’s not the “easy-no effort” seminar version that gets you all excited, but won’t put a nickel in your pocket. These are answers based on the experience of raising “real money” from “real private investors”.
First, know this. Your private investors are walking around with an invisible antenna over their heads that is tuned to only 1 station: WIIFM or “What’s In It For Me?” Unless you can explain that clearly, quickly and concisely, you’re out. Private lenders have no patience for people who beat around the bush and waste their time.
Second, as a sophisticated private investor, I know that not all deals are good deals, and not all good deals (e.g. good for you) are good for me. So, don’t give me a canned elevator speech, and expect me to be excited and whip out my checkbook. First, “show me the money.”
Third, your private lender is as skeptical of the real estate market as the general public and doesn’t necessarily think it’s a “great opportunity”. How is your approach going to overcome those concerns and in fact benefit from them?
Next, anybody who has become wealthy enough to have capital to invest, did not get there by taking excessive risk with their money. The reason why lottery winners generally end up poor again is because they never learned this principle.
Or as Will Rogers once said: “When it comes to investing, I’ve always been more concerned with the return of my money than the return on my money.”
If you want private money, you need to explain to the investor, how he is protected from losing his principal and how he is going to get his money back (ROI = Return OF Investment).
And you must address the question of risk. Unlike most people, private lenders have fairly low risk tolerance. If the risk level in the deal exceeds their risk tolerance, no offer of a return is going to convince them to place their capital with you.
And the Final and probably the most important consideration for the Private Investor is: “YOU”.
Angel investors have a saying, “Bet on the Jockey, not the horse”.
Think about it. Would you invest your money with someone you didn’t know or respect, regardless of how great the deal was? I don’t think so.
Are you a person of high integrity, who does what she says she’ll do? Do you have the experience, knowledge and expertise and the team to see this deal through to a successful conclusion? And Trust me: No private lender is going to entrust you with their capital, unless these questions are answered and demonstrated to their satisfaction.
APLS-1009 Student Presentations
These student presentations are only available to the attendees of the Advanced Private Lending Summit (APLS).
They are their in-summit presentations along with critique they received in the room from Richard, Karen, and Bill.
It is completely unedited and is there for their review and continued support.
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Seed Capital: Will Your Startup Business Attract It?
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Want Seed Money for your Startup?
Well, as you might have figured out, you can’t just walk up to a potential private investor, tell him or her about your “Great Idea” or your Company, and expect them to write a check. No way! |
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Want Seed Money for your Startup?
Well, as you might have figured out, you can’t just walk up to a potential private investor, tell him or her about your “Great Idea” or your Company, and expect them to write a check. No way!
If you want to be successful in getting startup funding for your early stage business, you have to learn how to “attract” private or Angel investors to you.
So what’s the secret? Or to paraphrase a famous movie title: “What do Angel Investors Want?”
The short answer is: put yourself in the private equity investor’s shoes, and think about what you would want before you invested your children’s inheritance is some startup company.
Now, what I’m about to tell you may shock you. It’s not the “easy-no effort” seminar version that gets you all excited, but won’t put a nickel in your pocket.
These are answers based on the experience of raising “real money” from “real private investors”.
First, know this – Angel investors are walking around with an invisible antenna over their heads that is tuned to only 1 station: WIIFM or “What’s In It For Me?” Unless you can explain that clearly, quickly and concisely, you’re out.
Angel Investors and Venture Capitalists have no patience for people who beat around the bush and waste their time.
Second, as a sophisticated private investor, I know that not all ideas are good ideas, and not all good ideas (e.g. good for you) are good for me.
For example “lifestyle” companies (companies that will create an income for you but never build huge equity for the investor) are not investment candidates. So, don’t give me a canned elevator speech, and expect me to be excited and whip out my checkbook. First, “show me the money.”
Next, anybody who has become wealthy enough to have capital to invest, did not get there by taking excessive risk with their money. The reason why lottery winners generally end up poor again is because they never learned this principle.
Or as Will Rogers once said: “When it comes to investing, I’ve always been more concerned with the return of my money than the return on my money.”
If you want private money, you need to explain to the Angel investor, how he is protected from losing his principal and how he is going to get his money back (ROI = Return OF Investment). In other words you need a realistic exit strategy—preferably more than one.
And you must address the question of risk.
Unlike most people, sophisticated investors have fairly low risk tolerance. If the risk level in your business plan exceeds their idea of an acceptable and calculated risk, no offer of a return is going to convince them to place their capital with you.
And the Final and probably the most important consideration for the Private Investor is: “YOU”.
Angel investors have a saying, “Bet on the Jockey, not the horse”.
Think about it. Would you invest your money with someone you didn’t know or respect, regardless of how great the idea was? I don’t think so.
Are you a person of high integrity, and do you do what you say you’ll do? Do you have the experience, knowledge and expertise and the team to see this business idea through to a successful conclusion?
Trust me: No Angel investor is going to entrust you with their capital, unless these questions are answered and demonstrated to their satisfaction.
Private Money Networking
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Many entrepreneurs or real estate investors new to the game of raising private capital think that the quality of their deal or business is the key to getting private money. The private investors who read this are smiling, because this attitude is so typical and so far from the truth. |
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The truth is that success in raising money from private investors has a lot more to do with you, your team and the relationships you build. It is a process that I incorporate into my GRAD formula (Get Ready, Attract, Deliver).
I want to discuss the “Attract” part of the formula, because unless you are talking to the right people, the best preparation, and best pitch are going to fall on “deaf” ears. And the world of private capital is all about relationships.
Think about it. If someone came to you asking for a $100,000 investment, would you even give them a minute of your time if you didn’t know them and, neither did your colleagues or friends? Not likely.
And most “networking” meetings don’t even deserve that name. Contrary to common practice, the successful networker is Not the one who collects the most business cards. How many people do you think will remember you (or even want to remember you) after a 60 sec interaction which consisted mostly of you pitching your deal or your business to them?
Real networking is about building successful and “mutually beneficial” relationships with people. The questions the successful networker asks when he or she meets someone is
· Who are you?
· How can I serve you?
“Serve” is the operative word. No matter how much you think you know about a person, or his business, or the organizations she belongs to, the only one who can answer the question “how can I serve you?” is the person themselves.
Don’t make assumptions. Don’t try to figure out what you have to gain. Most people want to have personal and business relationships with “givers” not “takers”. Don’t you?
Since this is a forum, and I know there are many incredibly successful networkers on LinkedIn, I’d like to ask:
“What networking techniques have been successful for you?”
And
“How may I serve you?”
Richard Odessey, Ph.D.
For those of you who are interested in raising capital for real estate, I have a useful and free gift for you at http://www.InvestorWealth.com.
If you are an entrepreneur needing to raise capital for your business, I have a useful and free gift for you at http://www.RaisePrivateCapital.com
Private Money: $300,000 in 3 Months
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The 4th session of the (Keep Reading to Find Out How You Too can Have The Same Success. Watch the short video at the end of this article.)
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Attendees to this APLS came from California, Utah, New Jersey, Texas, Georgia, Illinois, Connecticut, and Maryland.
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Their backgrounds and their experiences were:
- A business consultant and coach for small businesses in the South and Northeast,
- Beginning real estate investors,
- A long-time successful rehabber and contractor now taking advantage of the unbelievable prices of 2-flats to 6-flats in the city,
- A husband and wife team with 25 years property management experience and now beginning their own investments into multifamily properties, and
- Long time business partners in the rehabbing and flipping niche – now private lenders themselves as well.
Special to note here is that one attendee, Stefan Szlembarski from Illinois, joined the InvestorWealthNetwork.com three months before coming to the APLS and learned what he needed to take the first big step and landed a $300,000 investor for his business.
Stefan also took advantage of the InvestorWealthNetwork.com, ‘members only discount’, for the Advanced Private Lending Summit and joined us here in Atlanta to really turn the fire up under his new private money generating abilities.
(Watch this clip of the 1st day of the APLS where Stefan tells us about his successes just from the information he got from his InvestorWealthNetwork.com Membership, AND USED to raise $300,000.)
10 Things an Entrepreneur Should Never Tell An Investor
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When you talk to an investor about your business and your offering, he or she is usually listening with an ear of how to eliminate you from consideration. Unfair yes, but true. |
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After all, the investor is risking his or her children’s inheritance on your business, and they are very sensitive to any percieved “danger” signs.
Here are the 10 most popular “danger” signs. Say anyone of these things and you will very likely eliminate yourself from any possibility of an investment.
1. “I have no competition”. or anything indicating that you are too casual about the competition. After all, the only way there’d be no competition is if nobody wanted your product or service. The competition may not address the needs of your customer as well, or as economically, and that’s what you should address.
2. “We will capture a high percent of the market”. It is not realistic to expect your start up business to capture more than a few percent of the market (and even achieving that goal is a challenge).
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Raise Money from Private Investors with No Experience
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Many new or beginning real estate entrepreneurs despair about raising money from private investments to fund their deals, because they have not yet done a deal themselves. |
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Therefore, they think, “Who would want to invest with me”. It feels like “Catch-22”.
Now, experience is important. However, it doesn’t have to be your real estate experience. In order to understand this, you have to start out with a change in mindset.
Let me ask you a question.
When you invest in the stock market, do you invest in a company like IBM or do you invest in the CEO of IBM? Heck, do you even know who the CEO of IBM is? Probably not. You see, private investors feel much more comfortable investing in a “Company” rather than an individual.
So, besides all the other advantages of forming a legally recognized entity like an LLC (Limited Liability Company) or a Corporation, you acquire the credibility of being a “Company”. By the way, the dba (doing business as) structure is not a legally recognized entity and brands you as an amateur.