I would love to buy rental properties however my personal cash has been more or less tapped out with the falling equity in my house. Therefore I need to use other peoples money however I don’t know the best way to "ask" them for it and of course I am a little afraid of the "what if’s" of the whole situation and losing their money. Is it best to offer a nice rate of return on their money for the short term or offer them equity in the property – more like a partnership. However, as I mentioned above I don’t have a lot of skin to throw into the game…anyhow any suggestions would be welcome. Thanks as usual!
Home | Investing | Blog article: How can I generate interest/confidence from potential investing partners for real estate investment?
? 5:07 pm on September 2, 2010
Without being an experienced investor, you will not find many willing to give you their money without any of your own in the deal, much like everyone else has said. In addition, some lenders won’t lend to you, but would prefer an LLC instead.
Hard money loans might be a better route for you, but take note that these loans often have high interest rates and offer short term financing. Hard loans can be handy for those with little to no credit and in a crunch for money. These loans tend to focus more on the finances of the property (equity, ROI) rather than the borrower (like a traditional loan would). In addition, a lot of these lenders as well would like experienced investors.
I would suggest doing some research on real estate investing, expanding your education in the field and joining some local REI clubs. Networking in this field is the number one thing you can do to get going in the right direction, so start small and local and build from there. You will probably have to finance at least one deal on your own, so make sure it’s a good one to use for your portfolio. Track record means a lot in investing. Good luck!
ibu guru 5:07 pm on September 2, 2010
You cannot approach prospective investors when you have no cash to put up your share, and especially when you have no experience & expertise in managing such investments. If you and a family member want to go in together on a project, perhaps you can arrange a partnership agreement where they put up a larger percentage of the down payment, and you do more of the work – a "sweat equity" deal. Do not try this with anyone but an immediate family member or a person who knows you very well and has a similar investment outlook, goals, interests. And make sure you put everything in writing.
From what you say here, even if I were your mom or dad, I would not invest with you simply because you have no real clue what you are doing. You need knowledge and property management experience before you do diddly. You are not ready to invest, even if you put only your own money at risk.
Doctor Deth 5:07 pm on September 2, 2010
unless you are risking some of your own money and are doing 100% of the legwork – finding properties, etc, investors don’t need you
1-property would have to need minimum of expense to make it rental-ready
2-there has to be demand for rental properties in that area – every month without a tenant eats into yours (and investors) incomes
3-you need to show positive cash flow from day 1
4-YOU would have to have pretty good credit yourself, so you don’t drag down the others by increasing the int rates, as well as enough income to almost qualify on your own
without all of these things, you have little hope of finding investors for partners
anyone who has the 20% down plus closing costs needed to buy investment property (which it probably all YOU are looking for with investors) doesn’t need anyone else’s help
Chad Doty 5:07 pm on September 2, 2010
I’m with the last two response about experience. You don’t have the proof yet. You might be able to do it, but the person investing would be gambling.
Get educated first. Learn how to find, evaluate, acquire, renovate, (operate or sell) properties first. Then when you have the education (and it needs to be more than a book), approach the close circle about doing it. The other option is hard money but even then they would look for some level of education or experience prior to lending.
BillH 5:07 pm on September 2, 2010
I suggest that instead of pulling your hair out trying to figure out the system yourself, obtain one of Ron Legrand’s courses on obtaining private money. I think you’ll love the system. It’ll save you a lot of hassle. No, I’m not an employee of his or anything like that.