Epic Real Estate Investing - How to Raise Private Money for Real Estate | 989

Episode Date: April 15, 2020

In today’s episode, Matt shares the 5 steps that he has used to raise his first million dollars of private money for real estate! Tune in and find out more! Learn more about your ad choices. Visit megaphone.fm/adchoices

If you're a natural people person and you're just loaded with confidence and you've got the gift for gab, then you've probably got no problem raising private money for real estate. But if you're more of an introvert or maybe a little scared to ask for the money or the experience seems a little creepy or awkward or uncomfortable, kind of like you're bothering somebody, then you're going to love this. This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics.

The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helping real estate investors do just that for more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit r-e-I-Ase.com. Here's Matt. Hey, Epic Investor, it's Matt Terrio from Epic Real Estate, where we show people how to invest in real estate with an emphasis on retiring early. The first step in doing that is just shift in your mindset, shifting your focus from making piles of cash to creating streams of cash.

This is the Epic Real Estate Investing show. That's what we do here. And if this is your first time here, really glad that you found us. Make yourself at home. And if you like what you hear, make sure that you hit the subscribe button before you go. So you can come back. and if this is not your first time here, welcome back. And thank you for sharing this with your friends and family.

I love that about you. All righty, it's Creative Acquisition April where the entire month I'm filling your creative financing toolbox for the shipping market. It's going to increase your deal volume. It's going to increase your cash flow potential. It's going to require less money to get involved, which means you're going to have less at risk. It's a great hedge against inflation, considering all the stimulus packages that are coming through the system right now. And really, it just gives you options.

The more property that you control after all of this, because that's the name of the game is control. And the tactic is creative financing. And the more control that you've got after this, the more options you're going to have to establish and bolster your financial freedom. And if done correctly, you'll never have to work again. It only takes one of these downturns, even if it's a slight one, it only takes one of to turn everything around and position yourself to be free.

Options equates to freedom. All righty. And these are all the benefits of incorporating creative acquisition and financing terms into your offers. And if that's important to you, you're going to want to grab the two cheat sheets that I created for you, the 21 creative financing terms and templates every investor needs for a shifting market. You can get those really quickly for free.

Just download them at epic breakthrough.com. So a couple days ago, I was telling you, about a deal that I just put together. Actually, it was two of them. And I was able to put your used private money in for the down payment. And I was able to access more private money than I actually needed. So I actually put a nice chunk of cash in my pocket. And I've got two properties that are going to create a great cash flow for me.

And I promised you today to walk through the whole thing. So you can go back a couple days. You can hear all about those deals. But what I want to talk about today was, where did I find the private money for the down payment. That's the big mystery. And it's really one of the tried and true time-honored ways to really speed up this whole process is by using other people's money.

You know, real estate allows us to leverage money in a way that really isn't available to the average person in any other investment. I mean, you can get rich using your own money, but you get wealthy using other people's money, not to mention much faster. That's why they call it leverage. It maximizes what you already have to work with. giving you an advantage that you otherwise just wouldn't have. So today I've got the what, the why, the who, the where, the when, and the how to raise private money.

And we'll go through each one of those in that order. All righty. So what is private money? Well, to understand what private money is, you have to understand what the other types of money are, I think. You know, there are three types of money that you can leverage in real estate to accelerate your wealth creation. First, there's conventional money, the type that's offered at a bank. No real explanation either there, I don't think. Second, then there's hard money, and that's the type of money that can be found with a simple Google search.

Just go to Google and type in hard money lender, and maybe hard money lender near me or hard money lender in your city. And that's a pretty easy find as well. And then there's the third type of money, private money. and that for some reason is a huge mystery for people. You know, it's probably why you're listening to this episode today to pull the curtain back on that mystery. And it's a mystery that people find just difficult to figure out because it's not clearly understood that private money

is really what we call relationship money. And it's not clearly understood how to access it because what people don't realize is that the relationship has to be in place first. Most people skip over that part, making it the mystery that it is. And so that's private money. It's relationship money. You have to think of it in those terms because that's what private money is. You know, if you find a private money lender with a website or on a Google search,

they're not private money lenders anymore. They've made a business out of it, and they'd probably more qualify as they, hard money lender. But private money, that's relationship money. That's your relationships, or the relationships of people that you have relationships with. There is a fourth type of money that you can access for real estate, and it's my favorite type. And I'll share that with you a little bit later. You'll really appreciate it. But let's stick with private money for now. That's the subject of today. And it is essential in accelerating your wealth creation. So this is really important. So that's what private money is. It's relationship money. You need the relationship prior to getting

access to it. Got it? All right. So why do you want to access it? Well, it's typically cheaper. It's typically easier. It's typically it comes with greater flexibility with the payback terms. And done right, it can be a limitless supply of funds for you and your real estate.

And in an appreciating market, it's not as critical to access. But when the market shifts, hint, hint right about now, When the market flattens out or it even declines, conventional and hard money lenders, they tend to raise their rates and raise their fees and they'll tend to tighten their guidelines to hedge against the risk in a declining or depreciating market. So private money can be the only source of other people's money that will make sense for your deals. You know, the other money might be too expensive and it takes every deal you got and turns it into it. a no deal because now you've got to pay all the financing fees. But with private money, done correctly, you can sidestep a lot of that. All right. So who do you ask? Where do you find it? And when should you ask? All right. So let's do all of those three really quickly.

The who is just about anyone. It can be friends. It can be family. It can be professional associates, everyday acquaintances. It can be friends of friends. Obviously they need to have money or access to it to lend, but a private money lender can be anybody. There's no rules here. Now, where do you find them? Wherever there are people. Pretty simple. Don't overcomplicate it by looking for those secret locations of where the private money lenders hang out. If there's a group of private money lenders hanging out somewhere, that money is not going to be so private. Those are people that have made their intent to make a business out of it. And that's not private.

That would fall more into the hard money category. Private money can be found at the social gatherings like parties or happy hours. Let's see, professional gatherings like Chamber of Commerce meetings, networking events, or industry organizations. Could be people that you see at the gym every day. Could be parents that you meet dropping your kids off of school. The locals at your neighborhood coffee shop would qualify. People are everywhere.

I know, right? Hello, Captain Obvious. Just covering all the bases. So we had to cover the where. Now, when? When do you ask? Because we're talking finances with people and people act differently around that conversation. And most people are private about their money. So exercise some discretion in this conversation. You know, talking about it in big groups is probably not the best idea. You know, most of the time, I guess there are exceptions. But typically one-on-one, conversations are best for private money. Now, let's get to the how. How do you get it? Well, starting the conversation was always the most difficult part for me. I mean, it was just, that was the awkward part. That's where I got really uncomfortable. And to a point, I just wouldn't even bring it up.

I don't want to look like, you know, lack of a better word. I've got a word in my mind that I didn't want to look like, but I'm not, I won't say it. I just don't want to look. bad, I guess. And just another lost opportunity because of my fear of looking bad again. And losing opportunities was getting really expensive. So being the introvert that I am, and I am very much so, I get to shine a little bit, I guess, on the podcast, but I'm in seclusion and I don't have people around, and I'm just talking to you. But I am an introvert, very much so. And being the introvert that I am,

I had to figure out a different way to do it to where I could actually do it because I knew I was leaving money and opportunity on the table by not accessing or asking for private money. So I'm going to give you the five steps that I came up with. These are the five steps that I used to raise my first million dollars of private money, and I still follow them to a T today.

And I'm using them a lot right now because as we're moving into this shifting market, I've got a feeling I'm going to have a need for a whole lot of down payments with my creative financing strategies. So you want to dig your well before you're thirsty, and that's exactly what this entire five-step process that I have is based on, is doing just that,

digging your well before you're thirsty. Even if you're thirsty, dig the well before you take any water out. Okay? So step one, and this is what really kind of changed everything for me. Ask for permission to discuss. Ask the person, is it okay? You know, this was so simple and obvious and a total game changer for me. This could be the one tip that gives you the big breakthrough that you're looking for, actually.

I mean, this right here might be all that you need to listen to. And it sounds something like this. You know, after normal conversation, the pleasantries, the small talk, the current events are discussed. And at a natural pause in the conversation, it'd be something like, hey, John, would you mind if I asked you a couple questions about your finances? That's it. John, would you mind if I asked you a couple questions about your finances? I've never received a no to that question. never when it's asked in that way so ask it it removes all anxiety and gives you a free space to

ask the next three key money raising questions all right ask for permission that's step one step two these are the three money raising questions and i've been using these for a very very long time uh mr j massy you might know him from his uh his podcast cash flow diary we got started together We got started at the same time in the same office, and we went out to raise private money for a big deal that we had. I mean, we'd wholesale a bunch of Midwest houses up to that point for $30,000,000, small stuff. And then we found this big project. And we had to go out and raise, I think it was $1.6 million, $1.3 or $1.6 a long time ago. But this is what we came up with of how we were going to do it.

So these are the three questions that enabled us to successfully pull that whole deal off. and it was 100% private money, more than a million bucks. And we had never done anything like that ever before. Okay, so after you got permission, next question, okay, great. So would you be open to a 10% return on your money? That's the question. Would you be open to a 10% return on your money? Use those exact words.

And when asked that way, I've never received a no to that question either. Okay? would you be open to a 10% return on your money? Second question. Okay, so how much would you have available for that type of a return? Use those exact words because when asked that way, I have always gotten a number out of the person. And when they give you a number, make a mental note of it.

You're going to need that later. And then the third question is, you know, I'm working on a deal. I don't have it yet. But if I do get it, would it make sense? for me to call you about it. Use those exact words, especially that last part. Would it make sense for me to call you about it?

When asked that way, I've never received a no to that question. And now you're done. Okay, so you've asked the three questions. You've got your answers. Now make a note, a mental note of the person's name and the number that they gave you, that they would be open for that type of investment. And then just change the subject and move on. through the conversation.

And if they ask more about it, because many will, try to avoid the conversation by just saying, you know, it's not the right time. I'd rather just talk about it when it's real and then move on with the conversation, change the subject. All right. So that's step two. The three money raising questions. Step number three, you're going to go ahead and take all of the yeses and you're going to

enter them into your database. If you've got REI Blackbook, that's what that's for. Or if you don't or if you don't have a CRM or anything like that, Just keep a spreadsheet or just write them down on a legal pad if you want. And just write their name down, put the number that they gave you to the side, and then you'll enter their contact information. You want their phone, their email, and their mailing address. You've got to get it all.

Remember, this is a relationship you're building. It's relationship money. And to build a relationship, you need the contact information. Okay? The relationship comes first. Don't come back to me and tell me this doesn't work. There's nothing you could tell me that would convince me otherwise. I've been successful raising private money for more than 10 years doing it just this way.

And those deals that I got the private money for, just this week, the one I talked about two days ago, this is how I got the money. Right? I had this conversation a long time ago, but now that person is in my network and I know I can call them at any time. So if it doesn't work for you, it's because you've rushed the relationship. and either they don't trust you or they don't like you yet. So you got to give it time. Relationships don't happen in a single conversation. Okay?

Step four, I want you to immediately write a handwritten personal note to them. And if you have one, include your business card in the handnote and then drop it in the mail. Like right after the meeting. Okay. And then stay in touch like you would with any relationship that you value. This is no different. That means Christmas cards are in order. Birthday cards should happen.

Random friendly phone calls are made. You know, if you don't know, I'm a real sneakerhead. I love my Nike and I love my Air Jordans. And I've got an acquaintance. I'd call him a friend now. But he started out as an acquaintance. And he'd be one of those guys standing in line in front of the foot locker, hours before it opened, like at the crack of dawn,

and it's still dark out. And he would be standing in line waiting for the store to open on Jordan Release Day. And he'd go around town, he'd shop, he'd be online, he'd be searching for shoes all the time. And he'd hit me up every time that he found something that he thought that I would like.

But in between those calls, when he had a shoe that he wanted to share with me, in between those calls, he'd send me a text message on every single holiday. Still sends them today. Like Father's Day. like Veterans Day. He knows I'm a Marine,

so he sends it on Veterans Day and Memorial Day, St. Patrick's Day. And of course, it happens on Easter, it happens on Christmas, it happens on Thanksgiving. And it's just something simple,

like, Happy Fourth of July, Matt. And I know what he's doing. I know why he's doing it. He's building the relationship. He wants to stay connected because he knows I'm a good buyer of shoes. And, but I welcome the text messages.

I love getting them. I still smile every time I receive them and I text him back, hey, thanks. Happy Fourth of July to you too, Pedro. And he never misses the day. That's now a relationship. And I answer the phone whenever he calls. So consider something as simple as a holiday text message

to your private money relationship list. I've been the recipient of that. It worked very well on me. And now I use it and it's working very well for me. It could be that simple. Okay. All right. So step number five,

now that you've got that all set up, right? You've had the permission to talk to them about their finances. They gave you the answers to your three money raising questions. And you've got them in your database. You wrote the personal note. You're staying in touch. Now step five. You know what you got to do?

You got to go find the deal. Nobody's going to give you any of their money until you got one. And here's two really important things. Make sure it is a deal. number one and number two, make sure you have it under contract before making that call to your private money people.

Two things. Non-negotiable, all right? The worst thing you can do is go through all of this work, building relationships, and then ruin them by wasting their time with crappy or even mediocre deals.

And especially when you don't have them under contract and they're just big maybes at best that eventually never happen. So when you can check those boxes, good deal, check, under contract, check. Now make the call that they said would make sense for you to make. Now you call. I'm telling you, you're going to blow it if you make that call and try and close the deal before you have a deal. So find the deal first.

Okay. You can go ahead and lay your foundation and lay the foundation. and lay the foundation of all of those relationships, that's fine. But don't pull the trigger on the money. Don't pull the trigger on the presentation until you've actually got something. All right? So this is my introverts guide to raising private money. But there is another type of money that I like even better.

And we've actually been talking about it quite a bit this month. It's the fourth source of money that I promised in the beginning. and by getting access to it, it will greatly decrease the amount of private money you need to raise. And I'm talking about the seller's money. I'm talking about creative financing. Creative financing, this is where you place the money you need. You replace the money out of the equation with an idea.

In the world of the epic real estate investor, we know these ideas to be terms. So as we purchase property in one of two ways, either your price in the seller's terms or your terms and the seller's price. As long as you can control one, the price or the terms, you can always make a deal for yourself. All righty? So I give my private RIA's clients cheat sheets to use when they're putting their deals together. If you like copies of those for yourself, go to epic breakthrough.com.

And then you can follow in the footsteps of all of my private clients that have all replaced their day jobs income with passive income. All righty. So that first step is over there at epic breakthrough.com. All righty, so if you found this episode valuable, there is a good chance that you know someone else who would. And then when that person's name comes to mind, share it with them and ask them to click the subscribe button when they get here. All righty, I really appreciate that and I'll take great care of them.

I'll make you look like a rock star that you are. All righty. That's it for today. God loves you. So do I. Peace, health, blessings, and success to you. I'm Matt Terry. I live in the dream.

Yeah, we got the cash flow. Yeah, yeah, we got the cash flow. You didn't know, home for it, we got the cash flow. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.