We have all heard it before.
“Say bye bye to the 9 to 5, exit the rat race and build more freedom into your everyday life.”
Sounds simple, right?
Today I am writing about Joint Venture partners.
These are the passive partners that we set out to find in order to fund our real estate deals. We need to find and build healthy relationships with these partners because, these are the investors who have money to invest but they’re not sure who to talk to or how they would go about investing in real estate.
They usually know that investing in real estate is a good idea, but they are never actively involved.
In order to build your real estate business to a level beyond a few houses or apartments you need to understand how to talk to, present to and find Joint Venture Partners. They are the lifeblood behind working with Other People’s Money.
So to start I’m going to ask you a question.
What is the biggest fear we’re all facing when it comes your own success?
I bet that a lot of things come to mind. I know they did for me.
Things like, the fear of talking about money, the fear of looking stupid, the fear of making wrong decisions and failing, or maybe even the fear of what happens if you achieve the success you dream of.
These are all valid fears, however there’s one fear that is built into human nature and so vile that it causes us to harm ourselves, it causes us to choose painful or harmful options instead of charging forward like a knight riding into battle.
This fear, is the fear of the unknown.
It’s the fear of not knowing what’s going to happen and not knowing what’s on the other side of our decisions and actions. It’s the main factor that keeps people in bad relationships, and in the careers they hate.
Here’s one of my favorite quotes from Zen Master Thick Nat Hahn,
People have a hard time letting go of their suffering out of a fear of the unknown, they prefer suffering that is known.
Think about that last sentence for a second, “You prefer suffering that is known”.
You would prefer to endure self inflicted pain such as working at a job you hate, not making the money you should, or living a lifestyle that you don’t want to live, than you would to transform your fear of the unknown into a curiosity for success.
To be a successful real estate entrepreneur you need to have curiosity, you need to come at it with an open mind. There are so many ways to be involved with real estate, and so many ways that you can creatively finance a deal that if you’re not open to learning and exploring those options then you can seriously hold yourself and your success back.
Here is something valuable to think about. Ever hear the phrase, you don’t know what you don’t know?
Take a look at the circle above, on the left we have what we know, and on the right we have what we know we don’t know, but in reality those only make up a small portion of the available knowledge on a subject, the biggest part of the circle as you can see is made up of what we don’t know we don’t know.
I think this is very valuable to think about, not just in real estate, but in life.
Once you realize that the unknown is all around us, that its not something to be afraid of, then we can start to transform that fear of the unknown into a curiosity. A curiosity that we can use to build wealth and success.
Think about the first major purchase you ever made, maybe it was the first house you ever bought. How scary and exciting was it to actually get the mortgage and make that purchase. Think of all the unknowns that were going through your head at the time.
My husband Warren and I went through the same thing when we were buying our first house together. Markets were a lot different than they are now. And while I owned a small house, that I had sold for $66,000…
For us to spend over $100,000 was very nerve racking. We ended up buying a small place for $95,000 because we were afraid and we didn’t know what was on the other side of the $100,000 mark.
A few years later we sold that house for $118,000 and made a huge jump, (for us at the time) to a house worth over $200,000. This was a big leap for us, and there were quite a few times where we questioned whether we should have done it or not. Our mortgage was going to double, taxes were going to double and our utilities probably doubled as well. To think that you’re going start paying at least two times what you’re used to for your own house, is a lot for some people, it’s enough to scare them away from making that change.
But we did it, and boy did it pay off. That move started us on the path that we’re on now. Within a couple of years the housing prices in Regina went crazy and we were able to pull out equity from our new home and sign up for the full Rich Dad Poor Dad training’s and start our Real Estate Investing. The Rich Dad courses were $27,000 at the time, another huge leap of faith was needed here.
I still remember Warren, taking MORE than a few steps back when they told us the price of the courses.
But you know what, buying that house, and signing up for an education in real estate was the best decision we ever made.It put us on the path to owning over 45 millions dollars in real estate.
The only thing I wish now, is that we would have kept our first and 2nd house as rental property.
Now you’re probably asking how learning about our fear of the unknown applies to real estate?
We’ll get to that right away, but first, I want to give you a formula that I personally follow and that I’ve based all of the education that I provide my coaching students training on.
Knowledge + Experience = Understanding.
Without experience, knowledge is useless, we don’t truly understand how something works or how we can benefit from it without actually experiencing the process.
You can gain knowledge through experience, but it’s going to be very expensive knowledge, a lot of mistakes and a lot of trial and error. This is usually why you see amateur real estate investors selling everything and getting out, and saying never again, they’ve tried to do everything on their own, including their education. It’s very costly and very stressful.
In all of the real estate investing education that I offer, we first focus on understanding.
Taking the knowledge and actually going out into the world to experience the process. Talking to realtors, evaluating deals, talking to JV partners, making the contacts and presenting your opportunities.
The only way to overcome the fear of the unknown is to make it known and to understand it with knowledge and experience..
Does that make sense? It’s a very valuable mindset if you can master it.
So let’s go back back to how this one fear, the fear of the unknown applies to real estate.
Fear of the unknown is what holds people back from buying and investing in real estate. Most people have a vague knowledge of buying a property, their experience is probably with their own house, and maybe a rental or two.
How many times have you heard a mortgage broker, bank or home builder tell people that buying their home is the biggest if not most important decision they’ll ever make?
That is a lot of pressure.
Combine that with a fear of talking about money and a lack of knowledge when it comes to investing.
Real Estate Investing gets lumped in with MLM businesses, get rich quick schemes and unicorns, all of which can make you a lot of money. Think about how much money you could make if you had a real unicorn?
I’ve even heard seasoned business investors, talk about investing in real estate as if it’s something they could never afford.
So why do you think that is?
Right… it’s because they don’t know what they don’t know when it comes to real estate.
People think that real estate costs too much money to invest in, they think it’s something only rich people can start and they think it’s way too risky to even consider.
That’s where we come in as Real Estate Entrepreneurs, It’s our job to know the industry and our market inside and out, so we can educate our money partners and show them why they need to invest in real estate.
An educated partner is a comfortable partner.
As the passive partners our job is creating clarity around our investment deals. The JV partner shouldn’t have to find out the market details on their own, that’s our job, their job is the money.
The problem lies when you don’t understand how to properly speak to an investor in a language that they need to hear you. When an amateur investor approaches a new JV partner, they usually start off with the deal, how much money the investor will make on the deal, how great of an opportunity it is, throwing out percentages on returns that seem too good to be true.
They usually present a lot of information, but in a confusing and unstructured way.
This is exactly how you lose the deal, information presented in a confusing way means that the investor can’t understand the deal and they get confused.
For the most part, people who you approach for money, put their faith in the bank, they trust that their RRSPs, their Tax Free Savings Accounts and their Mutual Funds are doing the job for them, and the bank makes it easy.
Pick package one, two, or three. The banks know that they need to eliminate confusion.
Because… a Confused Mind Says No. Every time.
Here are three things you can do to make sure that you eliminate confusion, and bring clarity and precision to your potential JV partners.
Number One: Know Your Market
You need to know your market inside and out. This means that you need to be an expert in everything going on in the community you’re looking to buy in. You want to know about schools, jobs, rental rates, property prices, planned construction, commercial zones, community planning, amenities such as shopping, gyms and daycare’s. Know what the community is like during the day and during the night. What are the other local tenants like, is it a good area of the city or somewhere you should be aware of, like the hood.
You need to know what type of tenants you’re going to be dealing with in your properties. You also want to know about the economics of the city, unemployment rates, vacancy rates, what is the housing market like. Are there any major projects that are going to bring in fresh tenants?
The more knowledge you have about the property, the community and the city, the more a JV partner will trust that you’ve done your homework and that he can trust you with his money.
Number Two : Know both side of the deal.
The risks as well as the rewards.
This is where amateurs fall short, (“if they ever talk to a potential JV partner), they mainly focus on the rewards, avoiding all talk of the risks, and when asked about the risks, they can’t answer, because they haven’t done their homework.
It’s important to tell your JV partner what happens if everything works out like its planned, and what happens if everything goes to shit. Let them know that risks are a possibility but also let them know how you plan to mitigate those risks, what you have in place to ensure that deal goes through as planned and how you’re both going to make money in the end.
Money partners appreciate this. They want to know that you understand all aspects of the deal. This is something we cover extensively in 90 Days to 5k, You’ll learn that this comes down to demonstrating your experience, that you’re serious and that you’ve considered all the angles.
Number Three: Investor Returns.
The worst thing you can do is run into a JV partner meeting talking only about how you want them to give you money because of the amazing returns that you partner is going to make. 15%, 20%, 25% it’s going to be amazing, we’ll have cash flow for life. But do you want to know what the number one thing an investor is looking for?
They want to know when they’ll get their initial investment back. So if they put down 20% for a mortgage, they want to know, how long until they get their 20% down payment back.
Because until that happens, there’s risk.
Once they have their initial investment back, there’s no more risk, now they’re just getting a return as part of their deal.
Have you ever tried to talk someone into something you’re doing? Ever notice how they quickly lose interest and want to change the subject?
If you can put together a presentation binder that outlined the community, the economics, the payback of the initial investment and what happens if everything goes well, and what you doing to ensure that everything keeps on track.
Okay, that is is for now….
If you get anything out of this article, it is that you must present to a potential JV Parter the right way.
Here is a quick video, demonstrating how you should NOT present to an investor:)
I would love to hear from you!
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