Do you know how to get leverage-on-leverage by doing it all using other people’s money?

The stock market losses of the past few years have changed the way money is invested. Yes, the markets have rebounded but the way this generation of new investors view the market has changed – perhaps permanently. And change will always create opportunity for entrepreneurs!

There has been massive amounts of money pulled out of the markets and many investors, particularly older people – namely the huge population of Baby Boomers – have been incredibly reluctant to put it back in a risky and volatile market.

 

The tens of millions of Baby Boomers approaching – or already in – their retirement years cannot afford to gamble their retirement savings – their lives literally depend on it. So there is a massive pool of money waiting to be invested in safer, less volatile alternatives to stocks.(like real estate)

In Canada today, there is over a Trillion Dollars in investment retirement accounts (RRSP’s). And 97% of that money is earning less than 1% because it is sitting in cash, money markets or CD’s – earning practically nothing. This is all because those investors don’t want to go back into the stock market. And a portion of those investors are self-directed RRSP holders who can individually choose what to invest in, such as your real estate deal.

In other videos and blogs I go into more detail about  how you can get your deals in front of this money. It’s money where there are no loan origination fees, no bank qualifying , and you negotiate the finance rate. There’s no credit limit based on how many loans you have outstanding or even your credit score.

It’s all based on the security provided by the transaction and how you have structured to protect  your investor.

 

A huge advantage of investing in small apartment buildings is that not a lot of cash is required to buy them.

If you find just one self-directed RRSP holder with $50,000 to a few hundred thousand dollars then you basically have a bank.

 

Real Estate is the only investment you can make using other sources of money.

 

 

 

So, this is how you can easily do your first deal. And from there, you expand your private money sources – if nothing else, from the referrals of your first investor!

How many more deals could you do and how fast could you build your portfolio if you were not limited by your cash or credit?

Did you know that it’s generally simpler to raise big money than it is small money?

 

Here is my 4 four steps to Raising Private Money Formula to finding and structuring private money deals in real estate:

Step 1: Predisposed-

When it comes time to seek funding sources for your project, focus on predisposed sources: investors, people, or groups that are looking to invest in real estate.

They already believe in real estate as an asset class; they don’t need to be sold on the merits of real estate.

They just need to understand your deal.

Two examples of predisposed sources which I’ve already introduced are sellers (thru owner financing) and self-directed RRSP investors – other people’s RRSP (OPI).

The rest of the formula structures the deal such that it speaks to the psychology of the private lender.

 

Step 2: Control-

Here’s the key: the investor needs to feel confident they will get their principal back before they hear about their return.

  • As an RRSP investor once said, “Tell me about return OF my capital before you tell me about return ON my capital.”

 

Step 3: Low risk –

Show your potential investor/JV partner how you have proactively acted in their interests to protect their money.

An example of a risk mitigating strategy is purchasing rental offset loss insurance to replace lost rent revenue in the event a portion of the property were to burn.

 

This will build your credibility by showing thorough preparation. Your investor will see that you have their interests in mind.

You have answered the first part of their silent thinking, “Tell me about return OF my capital…” Once that’s done (and not before), you can now discuss “return ON their capital.

 

Step 4: High return-

This final step is about giving your potential investor a high return relative to the low risk that you have created.

This doesn’t mean that you just go wave some huge return to private investors and scare them away. That is what amateurs do, and that’s why they don’t fund deals.

Just as in any investment, the lower the perceived risk, the lower the expected return.

It is important that you first structure your real estate deal so that you can present it to your potential private investor with Low Risk.

And as you consistently demonstrate and make the case that the project is low risk, not only will you establish your credibility but the investor’s expectations of the financial return are simultaneously lowered.

Everyone wants a “deal,” and you will satisfy that desire by providing the investor a return that is just above their (low return) expectations; expectations which you justifiably created in your structuring of the transaction to protect their interests.

You give them a little more than they expect, and keep them happy!

That is how to raise any amount for real estate, whether $ 5,000 or $ 500,000.

This was a long one! I would love to hear any questions or comments that you may have.

 

I have a few really exciting things coming up!

One of them is a 2 Day Creative Finance Workshop that myself and one of my very first real estate investing coaches are conducting!

How many more deals could you do and how fast could you build your portfolio if you were not limited by your cash or credit?

Limited space, check it out now!

 

 

 

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