by Adam j. davis
Whenever I get the chance, I like to flip on some of the late night comedy shows on TV. Letterman, Leno, Kimmel. On top of being funny (at least sometimes), you can learn a heck of a lot from watching a good comedian.
A while back I met a guy who was trying to work his way up the comedian ranks. Had his picture up on the wall at a couple of comedy clubs. His picture wasn’t up there next to Richard Pryor or anything, but it was at least in the same universe. He was extremely funny to talk to in person. Hilarious. And…you know what I found out? He told me that….
…there are just about as many starving comics as their are starving artists and musicians.
Maybe this isn’t a surprise to you, but it was to me. I thought these guys made a few hundred bucks a night, couple nights a week – not bad. Perhaps they knock down $50k/year worst case as they make their way up.
Not the case at all.
When I asked this guy what made the difference between a ‘headliner’ and an ‘opener’ he was pretty shocked that I didn’t know. Fortunately, he cut me a break and clued me in. Here’s what he told me…
Some comics can go from nothing to something overnight (seemingly), but for most of them it takes a few years before they get their sea legs. By that time, most people drop out because they can’t make a living.
Sounds like a lot of other things, huh?
Do you think there are other endeavors out there where people pine away for years and years and then give up because the money didn’t come in? Real estate, maybe?
Have you ever known anybody who went out to strike gold, came up empty for a while and then cashed it in? I’ll bet you have.
Well, I DON’T want you to become one of those people who see their dreams die!
Listen: there are a few surefire ways to not succeed in business.You can choose bad people to do business with. You can have a lack of discipline. You can focus on the wrong things. This list is endless.
Narrowing this a step further, there are a few sure-fire ways to not raise private funding for your real estate deals. Chances are, if you’ve chosen to be a real estate investor, you probably realize that private money is the best financing source available. It can mean the difference between huge or marginal profits.
In a hat tip to a certain late night comic, I’ve put together a “Top 5″ list. It’s a list of 5 common things are probably keeping you from raising all the private money you need. Here they are:
1. You think private money is hard to get
2. You think you don’t have enough experience to have someone invest with you
3. You’re treating raising private money as a financing process
4. You’re ‘OK’ with trying to get hard money
5. You’re thinking only in terms of private money ‘loans’
-The End.
Just kidding. Let’s go through them one-by-one…
Private Money is Hard to Get
Whether you think you can or think you can’t, you’re right. Henry Ford said those words a long time ago, but they’re still true today. If you make private money out to be a mountain that is impossible to climb, then it will be. The people that say private money is hard to get are most often the one’s that never talk to anybody about investing, never present their business plan, never go to networking functions and spend a lot of time on other areas of their business other than raising funding (which can cure most ills). You can make getting private money really hard, or you can make it really easy. If other people have success doing it (and, people just like you) all over the country, then you can as well.
Don’t Have Enough Experience
I try to address this issue a lot. Seems like a lot of real estate investors wish that there was some graduate college that would confer a diploma on them telling them that they are officially deemed ready to get private money. They await the coronation ceremony. Well, guess what? There isn’t one. Nobody is going to tap you on the shoulder and walk with you happily over to the other side of the curtain. No. You have to take it upon yourself to ‘be ready’ to raise private funding. It can be for your first deal. One real estate investor I worked with here in Metro Detroit recently raised over $70k for his very first deal, and then profited over $30k on that deal after paying back his investors. He didn’t wait for somebody in the establishment to tell him he was ready – he just did it.
Treating Private Money as a Financing Process
When we first learn about real estate investing, most of the books/courses, etc. teach us about going to a bank for a loan. It’s almost like the banks are in business with the book publishers to keep their lobbies full of loan applicants. With a financing process (like getting a loan or line of credit) you simply fill out a bunch of information, pledge an asset or two and hope and pray that the overlords in the bank board room rule in your favor or that the computer making the decision is getting enough electricity that day. The financing process is ruled by metrics, ratios and shrewd asset valuation. Private money is not like this. The numbers on a deal matter far less than the person who is doing the deal. The ‘character’ component of the investing process is more important then the ‘collateral’ component. There is universal place to put in your private money application. If you don’t make your opportunity available and get it in front of the right people, you won’t have much success raising private money. It’s a marketing process
OK with Trying to Get Hard Money
Boy, I don’t know about you, but I really don’t want to pay 10 points and 20% interest. This is like loan sharking. Flushing away profits on deal after deal makes no sense when you could spend just a little bit of time, get private money and save tens of thousands of dollars per year. Real estate investors that prefer hard money to private money are…simply…lazy. If you have to bust your butt on a deal, do everything from A-Z and still give up more than a proportional share of the profits to a hard money lender, well, then something is definitely wrong with your approach. It’s just not good business to give up more profit than you should. Now, it also makes no sense to leave your deal flow subject to the whims of the magical disappearing hard money lender act. You can lose a lot of potential deals because you need to have the hard money lender approve everything. Who’s in control, anyway?
Only Private Money Loans
It’s one of the first things we learn about in business. “Borrowing money.” Like: “hey mom, can you loan me $5 so I can start a lemonade stand?” We’re almost conditioned to it from a young age. I guess maybe it’s because of the debtor nation we live in (national debt: trillions). But, you really handicap yourself when you think of private money only in terms of ‘loans.’ There are two type of private money deal structures – only one of them is ‘lending.’ If you cut yourself off from the other structure, which is equity investor, you miss out on a lot of private money potential. It’s like only using half your brain.
Ok. That’s a lot to chew on. I hope you take it to heart. It’s a shame how many real estate investors are missing out on a great time to scoop up real estate by letting the above things hold them back from getting the private funding they need.
Eliminate these 5 deadly mistakes and watch your results change dramatically.
Happy Investing.
Adam Davis is a real estate investor, author and speaker. He teaches real estate investors how to raise capital. Adam has completed hundreds of deals- from single family house flips to apartment buildings. He has raised millions of dollars from private individuals. For a FREE audio program on how to get private money go to: http://ForeclosureswithPrivateMoney.com
Article Source: http://www.articledashboard.com/Article/5-Deadly-Mistakes-That-Are-Keeping-You-From-Getting-Private-Money-Right-Now/1469504