By Greg Herlean
When Mike and I host our Property Bank events, we always get a lot of questions about how to get investment capital. After all, our students don’t usually start out as millionaires with all of the financial freedom they could ask for. They usually start out as middle-class, working people with a dream of leaving the 9-to-5 world and making a career out of real estate investment. Because of where they start and where they want to end up, they generally have a lot of questions and some anxiety about getting funding for their flip projects.
Needless to say, this is where I step in. With over a decade in the investment and wealth-accumulation business with a focus on real estate assets, it’s safe to say I’ve learned a few things about pitching opportunities to investors along the way.
Understand That Your Investors Want to Invest in Great Deals
First, get it out of your head that finding funding is hard or impossible, and stop thinking that your investors don’t want to put their money into your flip properties. Here’s the secret: investors want to invest. They just don’t want to lose their money. Keep this in mind, and you’ll start to see the difference between trying to convince them to invest in a property and showing them why your property is a lucrative investment opportunity for them.
Make Your Pitch an Experience
Next, don’t give a canned speech. Yes, you should prepare your pitch, and you’re going to need an “elevator speech” to explain what you’re proposing, how much you need and what they get out of it. But that doesn’t mean you have to give a dry, boring speech.
Make your pitch an experience. Think of ways that you can make yourself and your project really stand out. Bring before-and-after pictures of other projects you’ve completed (if this isn’t your first flip). Bring a clump of dirt from your property in a jar and tell them that you’re about to turn that dirt into cash (well, maybe don’t bring dirt to your investors, but you get the point).
Use Your Personality
Inject your personality into your elevator speech and show your investors who you are. As you talk to them about the market, the property and the earning potential for this project over a very short amount of time, keep showing them who you are. People want to do business with people they like, and you can’t show your investors how likeable you are if you’re too scared to show them a little personality.
Tell Them What They Get Out of It
Finally, don’t focus your pitch on yourself. You want to tell your investors what they get out of this deal, and you want to tell them early. In fact, you might even want to open with that. Tell them that you want to split the profits with them 50-50 (over and above their initial investment, which they will obviously get back).
Emphasize that they don’t have to do anything but provide the capital to buy and rehab the property. Then tell them about how you’ve planned for every contingency and how you’ll protect their investment through savvy exit strategies dependent on different scenarios. Show them that their risk level is a lot lower than their potential rewards, and you’ll get their attention.
And, above all else, don’t drag it out. Tell your investors what you want to do, how they’ll benefit and what you need from them. Bring props if they’re appropriate (but, really, don’t do the dirt thing), and show your personality. You’ll be surprised at how many investors bite at your proposals.
And the best part? Once you’ve done one successful real estate investment with an investor, they’re much more likely to want to do more deals with you in the future because they’ll know you’re good for their portfolio. Making your first deal is your first step toward financial freedom.