Written by: Edna Keep, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise
People always ask me this question- Edna, why would people give me money to finance my deal? So, let me be first clear on the goal- People aren't just giving you the money to help you out. People do it because there's something in it for them. The Mindset Shift is necessary to pull this off. Have you heard the acronym-"WIIFM" What's in it for me? So, when you present the deal with the investor(s), make sure you tell them what's in it for them- "How they are going to get their Principal back?" But most people start talking about return on investment as opposed to return of investment and that's the mistake most of them make.
As we are talking about larger investments of $100K or more, the first thing people want to know is how soon they will get their principal back. You have to show them "How" first, so that investor(s)' risk level has reduced. Once you show the investor(s) how they will get their principal back, you present your deal analysis and show them how they are going to get a return on investment. The return on investment is figured out through cash-flow, mortgage paydown and equity appreciation.
On the flip side, though, some investor(s) may ask you if all these for me, then what's in it for you? Your reply would be: The fact is, I do all the work but in five years or so, after you paid out then I share in all the profits. So, it's a little bit more of a long-term plan with me, but I am willing to do that to share the equity with you.
When you're ready to access other people's money, I'd recommend building some credibility by doing some groundwork by yourself. Like, practice with your own money and when you get some track record, then show to your investor with what you've done so far. If you don't have credibility or experience yet, then that's where your team is very helpful.
Also, most people don't buy multi-family by themselves because you need a team of managing partners, team members who can help you qualify for the mortgage and in the whole deal especially at the beginning. Because it's such a learning curve where it comes to multi-family and you don't want to be practicing with people's money.
When you're talking with your investor(s), let them know your team's experience- your mortgage broker, accountant, lawyer, realtor, property manager, your coach, your real estate investment network club that you belong to. Once your deals getting bigger, make sure you have different team members who can qualify for the mortgage and this is very important when you're scaling your real estate business.
Remember, if you want to scale your business, you need to have access to the capital, and your team members can help you do just that.
For example, if you keep looking for the deal but never buy it, then your realtor will not keep showing you the deals. Because you might be searching for that perfect deal, which is rare to come by. Learn how to analyze the deal. All of your real estate entrepreneurs need to work on your presentation and sharpened your deal presentation skills first.
The other thing that I want to point out is don't blow away your investors with your lack of experience. If you don't know it, then take someone with you to present the deal as well. Set up a three-way call, and this is what I encourage my students to do when I am coaching them.
You listen, you learn. Remember the third-party influence. Another thing to remember when you're presenting a deal is a properly executed executive summary. I've seen most people put too much detail in the executive summary. Keep it short and simple.
Edna Keep, Executive Contributor Brainz Magazine
Former Certified Financial Planner Edna discovered the power of real estate in 2007. Since then, Edna and her husband Warren have amassed a $60M Real Estate Portfolio primarily multi-family and primary with OPM. Since 2014 she has been training and coaching real estate entrepreneurs who wants to scale their real estate business into multi-family with Investor Capital. Along the way, Edna has learned that Mindset is 90%, or more, of a person’s success and specifically attributes her success to studying and always working at improving her Mindset. Thus, she focuses a lot on her students on Mindset training.