Property investors spend days, hours, weeks and months finding the next deal – some get lucky and find the next deal relatively quickly.
But the second part of the investment equation is:
Deal + Finance = Investment
You see, without finance the traditional investment equation is incomplete.
Many new investors don’t spend much time on how to raise equity capital from private money lenders.
It’s just as important, if not more important, for property investors to understand the ins and outs of raising money as finding the deal.
Are you with me?
We got a few questions from our last blog relating to who these private money lenders were and how would you find them.
So let’s try to answer that question.
Private Money Lender Circles
The Sophisticated Investor:
1. Venture Capitalists [super heavy weight]
2. Angels [heavy weight]
3. Private investors [super middleweight]
These investors are the pros. They do it for a living.
You don’t need to teach or persuade them to lend their money, you’d be stuffing eggs in their mouths. The money flows. 7 figures, 8 figures, if the deal is good, the money is too
But you’ll pay for it.
They’ll demand more returns and more control than a Non-Sophisticated Investor.
But you’ll learn from them.
You’ll get great contacts from them.
They’ll leave you to it [while it is going well].
They’ll want to give you more and more [while it is going well].
But if and when it goes wrong, they’ll apply more pressure than a Non-Sophisticated.
You’ll feel like you’ve borrowed from a bank.
They’ll have some nice tight security, and you won’t mess them about.
Where to find them: Business Angel Networks, Launches, Functions, Clubs & Openings, Lifestyle Management/Concierge, Flying Clubs, Charity Balls & Dating Websites [!]
The Non-Sophisticated Investor:
4. Biz Opp Seekers
These investors are not professional lenders or partners. They may never have done it before.
They need persuading on investing first, you need to take a step back. Sometimes they’ve been brought up to save, work hard, pay off their mortgage and retire – the exact opposite of leverage.
But, everybody with money has the same problem right now: they can’t get a return in the bank, stocks are volatile, government backed investments aren’t as secure as they used to be and people have lost faith. They’re motivated.
They need to do something with their money, they’re losing on it right now and they just need to work with someone they trust. They need help.
They’ll be a little more worried about where their money goes, they’ll want more regular communication and they’ll feel the ride of the rollercoaster.
But you’ll get more flexible terms, they’ll be more forgiving to market changes, and if things go wrong [which they always do], you can talk to a real person and you can come up with solutions.
They’ll probably expect a little less return [bank beating 5% might be good enough] and you’ll make a bigger difference to their life when you make a bit of money together.
Where to find them: Property Networking Events, Family [Early Inheritance], Progressive Property Events, Property Membership Sites, Business Networking Events, Mail List Brokers, Referrals [WOM]
If you want a more detailed synopsis on JV finance, and the exact Blueprint how to, you can download it here
This model is built over 7 years and £26M of JV’s [some failed ones that taught us the most].
Use this article as a guidepost & balance it with your experience and capital timeline as you work on who to approach when raising finance.
I would love to hear your thoughts on how else You can approach private money & Joint Venture lenders. Leave a comment, thought or suggestion below!