Jul 11
27
Just about every deal we’ve ever done in our ten years of investing together has involved a joint venture partner or private money.
In fact, we’ve used JV investors or private money on every single investment property we’ve ever purchased … and even our own personal homes. The only exception is our most recent purchase of our office and home which we’re moving into soon – we are using our own cash + bank financing to get that deal done.
After a decade of working together, raising millions of dollars to do our deals and being rejected more than accepted, we’ve learned an awful lot about raising money.
We have definitely learned what does not work.
And, unfortunately, what doesn’t work also seems to be the most common method used to TRY to raise money. At least it is the main way we get contacted by others who want to raise money from us.
What’s the wrong way to raise money for deals?
Well, there are more than a few wrong ways but here’s a sample of what I commonly get in my inbox:
“Julie and Dave, I have this really great deal tied up. I only need about $20,000 to close on this place. Once I close it will be a simple fix up and comparable properties in the area are selling for $50,000 or $60,000 more than what I am paying. Can we get on the phone so I can tell you more about it?”
“Julie, I need to find a joint venture partner for my deal. I have just put the offer in and will need to move quickly because it’s such a good price. I’ve already got a tenant lined up so it’s no risk. Please let me know who you know that would be interested.”
I took out the details specific to the location and even numbers. That stuff doesn’t matter. Even if you have the best deal on earth those details don’t matter if you’re sending an email like the above.
I filmed a little video about this:
And in case my video rant was not clear enough. Here are three very specific reasons why your attempts to raise money are failing:
- You’re chickening out and using email instead of putting yourself directly in the face of potential rejection. To raise capital for deals you MUST SPEAK WITH PEOPLE IN PERSON. Email SUCKS for raising funds. Period. Once you’ve had an initial meeting – in person – and things are moving positively THEN you can use email but you DO NOT START WITH EMAIL. There are 101 ways to get somebody’s phone number. If you can’t get them on the phone or can’t get them to agree to an in person meeting then one of the next two points are likely your problem.
- You have focused on yourself. Do you see anything in the above two emails about me?? It’s all about the person writing me, their deal and their need. Before you do anything with regards to raising money think carefully about what you have to offer to someone else. I am not just talking money and returns. What are you bringing to the table (experience, the deal, the team)? Also think about what cool stories you can you tell to get someone interested in what you’re working on. You really want to get to a point where you are interesting enough to the other person that they WANT to talk with you and learn about what you have going on. Then you can position yourself as offering something that they might want (versus you approaching them because they have something you ‘need’).
- You haven’t answered: SO WHAT?!!! Why should the person you’re speaking with care about what you have to offer. I don’t want you to use email to try to get meetings or prospects but using the examples above can you see see any reason why I should really care? Can you see any reason why this email has anything to do with me? Make sure you’re always answering the ‘so what’ question. Put what you say in the position of the other person. For example, “because I know it’s a hassle to do the paperwork and pull money out for just a 7 day loan I am offering $500 for the trouble plus I have all the paperwork done and will pay any other fees associated with the money transfer”. (if you watch the video this makes more sense).
