How To Raise All of the Money You Need to Do Your First Deal

When I first suggest the idea of buying apartment buildings as a means of achieving financial freedom, most people give me a weird look. By the expressions on their faces, I know they don’t believe it’s possible. And I can almost always predict what they’ll say next. It will be something like …

“You need hundreds of thousands of dollars to do that, right?” (You don’t, actually.)

“But I don’t have any experience in real estate investing.” (Thankfully, you don’t need any.)

The truth is that you don’t need thousands of dollars or experience in real estate investing to start investing in apartments. Did you notice that the entrepreneurs I introduced you to got started without a track record and, most of them, without any of their own capital? Yet two to three years later, they succeeded in replacing their income and quitting their jobs.

You want to know how they did it?

There are four secrets to apartment building investing success that will help you make your first deal and quit the rat race in the next two to three years?without prior experience or your own cash! This chapter is devoted to the first of these four secrets, which is how to raise all of the money you need to do your first deal.

When I speak to people about starting with apartment buildings, the biggest objection I hear is that they don’t have the capital. They tell me they’ll start their investing career when they have money.

But who knows when that will happen?

And so they wait 먹튀.

Or they’ll say they can’t see themselves putting a building under contract if they don’t already have the funds in the bank. Who will take them seriously? How can they raise all of the money in time to close? And how can they get money from investors when they don’t have a building under contract? It’s a catch-22, so they’re stuck.

You remember that when I saw a huge opportunity to flip houses, I had deployed all of my capital into the restaurants and had nothing left to invest. So I thought, Shoot, maybe I’ll see if some of my friends and family want to loan me money to fund these flips.

I remember when I got my first commitment for $25K from my brother-in-law. I had this huge AHA moment when I realized that I could flip as many houses as I wanted if I raised the money from others. At one point, I had deployed about $1M, and we flipped about three dozen houses over the next three years.

It turns out I didn’t need my own money after all. And neither do you.

The truth is, you don’t need tons of your own money or good credit to get started with apartment building investing. The solution to getting started now without having all the cash yourself is to raise money from private individuals.

Why You Should Raise Money from Others

Here are five reasons you should master the art of raising money:

1.You don’t need your own money. I hate stating the obvious, but since the lack of money is the biggest objection to getting started with apartment investing, it deserves to be stated plainly. Just to reemphasize this point: if you raise money from investors, you don’t need to use or have any of your own. DO NOT let this be the thing that keeps you from tapping into the best real estate strategy to achieving financial freedom.

2.You can get more deals done. Even if you have your own money to invest, there are only so many deals you can get done. On the other hand, if you are able to raise money from others, your ability to accumulate property is only limited by your ability to find good deals. The ability to raise money is an incredibly valuable skill to have.

3.You can do bigger deals. With the backing of investors, you can go after bigger deals (and get there faster) than if you’re just using your own funds.

4.You have more eyes on the deal. Richard Feynman, the famous physicist, once said, “The first principle is that you must not fool yourself and you are the easiest person to fool.”1 When you’re using your own money, no one else is looking over your shoulder, and you’re more likely to make mistakes. If you can convince others to invest in your deal, chances are, you actually have a good deal.

5.You’re helping people. People with money have two problems: (1) They’re not getting a reasonable and consistent return, and (2) they’re paying too many taxes on what they earn. You can solve both of these problems. You’re connecting people with one of the safest investments on the planet (multifamily) that yields attractive returns and offers incredible tax benefits. Instead of being afraid to ask people for money, you should be confident in knowing that you’re actually doing them a favor. Even though they might be skeptical at first, you’ll find that they’ll become grateful for the opportunity you’re providing to them.

You should be aware, though, that there are a few downsides to raising money and having investors:

You now need to report to your “bosses.” Chances are, you’ll have to report to your investors in one form or another. You may have to give updates and financial reports to your investors to keep them posted. This certainly is more work than if it were just you in the deal. On the other hand, analyzing the Profit and Loss (P&L) statements and sending out reports makes you pay more attention to the deal. You should analyze the reports even if there are no investors, but few of us have this kind of discipline, and as a result, we don’t pay as much attention to the investment as we should.

You may lose some control. You may not be able to make all of the decisions without a vote from your investors. As I’ll discuss later, there are ways to mitigate this risk in how you structure the deal.

You won’t get 100% of the profits. That’s true, but as the saying goes, 100% of nothing is still nothing. If you can own 100% of the building by using your own money, great! But if not, use investor money and get in the game!

All in all, the advantages of using other people’s money far outweigh the disadvantages. This doesn’t mean you shouldn’t use as much creative financing as you can (especially seller financing). Bottom-line, if you get skilled at raising money from others, you can get started with real estate investing TODAY.