One of the biggest obstacles that new investors face is finding funding for their deals. Even though this can be a challenge, it is far from impossible. Finding funding takes a combination of networking, working your personal contacts and the ability to present yourself and what you can bring to the partnership. If you don’t have the funding, you had better have access to deals. What is most often overlooked is that financers look at you and how you present the deal almost as much as the numbers themselves. If you can work to find deals and put your best foot forward, finding financing is not as difficult at you may think.
The first step to finding funding is with finding good deals. You will find that this process is just as difficult, if not more, than finding funding. In this stage, you need to align yourself with realtors, attorneys, mortgage brokers and anyone else who can provide access to deals on the ground level. You need to be able to get properties at a severe discount to entice buyers to want to move forward. If your buyers follow the 70% rule, you need to get the property even lower than that to turn a profit. This means monitoring the MLS to get first dibs on any new properties. It also means coming up with creative marketing to distressed homeowners, properties in probate or tax lien properties. Without a steady pipeline of new deals, any attempts at getting financing will be for naught.
Once you have deals coming in, the first place to find money is with the people closest to you. Between your family, friends, co-workers, attorney and accountant, you have more potential partners than you may realize. You can start with a good old fashion letter announcing that that you have started to dabble in real estate or a series of posts on social media. The more you post, the more legitimate you appear as an investor. It can be tricky working with people close to you, but there are many people with access to capital that want to get involved in real estate. Don’t dismiss the fact that you may have an uncle with money or there a friend of a friend that is interested in putting it to work. If you don’t ask, you will never know.
In addition to friends and family, you need to get your name out to people in the business. Between local networking meetings, investment clubs and following up with real estate professionals in the area you can quickly build a reputation. It is important to make sure you are ready to talk to people and have a good grasp on the business. The more detailed you are on the business, how you find deals and what your goals are, the more likely someone will want to work with you. It is important to go through the various worse case scenarios and exit strategies on every deal. Investors always want to know what their bottom lines are and how and when they will see a profit. By having a defined plan and exit strategy, you will come across as someone they will feel comfortable lending money to.
If you do not have capital, you need to highlight what you bring to the table. Regardless of what field you may have come from, you will have some talent that you excelled at that you can transfer to your real estate career. If you are good with numbers, you have to use that to your advantage. If you are good with organization and management, make that the emphasis of your pitch. You don’t need to be a salesman, but you do need to be able to sell yourself and talk to people. As mentioned earlier, you need to be able to present yourself and effectively talk to people. Investors really will give you the benefit of the doubt if you are able to carry yourself with confidence and portray that you know what you are talking about.
The last place to find finding for your deals can be anywhere. Between sporting events, dance recitals, poker games and even wings at happy hour you will come into contact with a lot more people than you may realize. Conversation will eventually turn to employment and almost everyone has an opinion about real estate or some connection to the market. The person you speak with at a bar may have a cousin that is looking to invest and just like that a connection is made. Every time you go to the dry cleaners or pick up a pizza can be an opportunity to find a partner. You don’t need to be overbearing but if the timing is right and you let people know you are an investor you will be surprised just how easy it can be to find financing.
Once you fully know the market and have deals coming in, you can start looking for financing. There are also many outlets for hard money lenders and even traditional lender financing options that you have at your disposal. Just because you do not have a surplus of your own money available is not an excuse not to be closing deals. If you network yourself and work your contacts diligently, finding financing on your deals will eventually be considered the easy part of the process.