Best Practices for Raising Real Estate Capital

It goes without saying that nobody wants to take on any unnecessary debt. And as a real estate investor, there is certainly a possibility of that occurring if one does not practice caution and strategy. Along with choosing the right properties to invest in, your strategy is also crucial. Utilizing best practices for raising capital is a key piece in that overall strategy; we’d like to share a few of these to help give you a leg up on the competition.

Think of Your Lenders

When an investor looks to raise capital for their investments, he or she needs to remember that their strategy goes beyond themselves; they must consider what their lenders are hoping to get by contributing to the partnership. If you’re lucky enough to have a friend of uncle that expect repayment, great, but generally, any loans will need to be at least paid back. Be prepared for the question of, “how easy will it be for me to get my money back?

And on that note, you certainly don’t want to lose a partner’s money in a failed investment. The damage it could do to your professional reputation and your ability to raise capital in the future might greatly be strained. Additionally, it has the potential to damage personal relationships. To that point, it’s important to know what you’re doing before you start appealing to investors for money. Once again, we know you don’t want lose anyone’s money, but you also want to have a strong sales pitch can pitch and be able to seamlessly answer questions.

Know Your Pitch. Know Your Audience.

Your pitch can greatly differ depending on who your target audience is. Convincing a family member to invest is going to look and sound different than the formal conversation to professional private moneylenders. That’s why it’s such a priority to become proficient with the details. Your uncle may not need them, but the specialists will. Perfect both your elevator pitch and full presentation. It is absolutely better to be over prepared than under. Be adaptable; some professionals will require a slightly different approach than others.

Humbly, Truthfully Brag

This is where it pays to be confident and bold. If your past performance says you have been successful, let them know about it. If you aim to raise capital, investors want to know that you are good at what you do; you can walk the walk. It’s okay to applaud your success through your networks and on social media. Build relationships, network, and situate yourself as someone who will climb the ladder of success – humbly and truthfully.

Always Have a Backup Plan.

Protect your character. Nobody goes into a project or a deal expecting to fail, but it can happen to the most experienced real estate investor. Your reputation is the most important factor in this business. Lenders trust you with their capital when you borrow from them; they are confident in your ability to repay the loan/investment. Expect to pay them back, whether your deal works out or not.

In conclusion, have a plan. Having the resilience and reliability to pay your lenders back even if you lose their capital, gives you the ability to shield your reputation.

Heed these practices on your journey to raise private money for your investments, and you’ll put yourself in a position to be successful.