Reading the title of this article you may think we're going to say things like, “Super Star Investors have perseverance and confidence” or “Super Star investors have big hairy goals and take massive action”.
Those are important but we want to keep this at a very practical level.
After watching investors for some time now it’s interesting the two things we're going to discuss having nothing to do with your “personality”.
We've realized that these two things apply to both the investor with 5 properties in one town and to the multi-national investor with developments all around the world.
Always Be Looking To Raise Capital
Every business needs capital and most investors start their real estate investment careers with savings or by leveraging the equity in their homes.
That’s extremely typical. And most stop there.
After they exhausted the capital that’s most easily accessible to them they stop.
And the interesting thing is that this doesn’t just apply to real estate investors.
Have you watched the show Dragon’s Den on CBC? Entrepreneurs go on the show to ask a group of multi-millionaires for money (capital) to grow their business. They’ve run out of their own money and now need a cash infusion to continue. Capital is the #1 request of each of the business owners on the show.
And running out of capital doesn’t just happen to small business owners.
A few months ago we spoke to a large real estate developer in the Caribbean looking for money. The banks wouldn’t lend him any more and he needed cash to continue the project. He was out on the streets “hustling” for cash.
Venture Capitalists are always looking for little hi-tech startups running out of capital that they can sink a few million into.
So this idea of raising capital is everywhere. After you’ve been growing your real estate empire for some time you’ll realize that raising capital is an ongoing part of your business building.
We look at our own real estate as a stand-alone business and are constantly finding new ways to fund it with more capital to invest.
Here are the two ways to raise cash for your real estate Joint Ventures...
A) Find High-Income Earning Professionals
Put together a one-page executive summary of the type of real estate we’re looking to acquire. Nothing too complicated, a one-page business plan of the type of property, profit projections and expenses is enough to get you started. You then share this with people you would consider doing a Joint Venture with.
The best results always come from teaming up with professionals, doctors, accountants, lawyers, large sales account managers who have money but no time. They are tied to their business but are looking to invest their cash which is often just sitting in a checking account. It's not uncommon for professionals like these to have $300K sitting in a chequing account earning 1% while inflation is ripping away at 3% (or likely much higher). They're losing money and they likely know it.
If you have already proven that you can “flip” a property or produce “positive cash flow” they will be very receptive to reviewing your investment ideas. You can either pay them a fixed rate of return, anywhere from 7% to 15%, for a fixed period of time or they can share in the profits, usually a 50/50 split of cash flow and any appreciation.
And if you’re shy about asking people to joint venture with you remember this:
“Timid salespeople have skinny kids.” - Zig Ziglar
B) Start A Side Business
After hustling to find more capital our next favourite method to fund your real estate empire is to create another stream of income that you can funnel into properties.
To do this you’ll need to pick a market. You’ll then need to craft your unique message to that market. And then find the appropriate media to reach it.
Those are your three keys to success. Read them again.
You’ll also want leverage. Any business that requires 100% of your time is more like consulting. You’ll be trading time for money. That’s definitely not ideal. You’ll want to start building something that will run while you’re sleeping.
Shameless plug coming up ... we’ve recently put together a very well received audio course on this topic because of the demand for it. If you'd like to learn more check out: www.OnlineMarketingFoundations.com
Here’s something we would like to share around side businesses. The world economy is moving really quickly right now. You’ll want to consider that starting a business that has the ability to transact a good portion of its sales online. Money is moving fast and inflation will continue to be a big factor in our economy over the next few years. Waiting 180 days for overdue invoices could be deadly.
You need a business vehicle that can keep up with the current velocity of money. We’ll be elaborating more and more on this point over the next few months.
The second similarity of savvy investors is that they all:
Build A Honking Large Database of Contacts
A database of professionals, buyers and tenants is a MUST HAVE. It is the most overlooked and undervalued portion of almost EVERY business.
It is a business' true asset.
We personally have multiple lawyers because different lawyers are good for different things. One may be an expert at real estate while another at litigation. We have multiple contractors and handymen because sometimes you need the high priced professional contractor and other times you need a leaky faucet fixed. But by having both in your database of contacts your life gets really easy.
Issues that popped up and caused us grief a few years ago are now solved in minutes by calling the right person in our database.
And I would highly recommend building a solid network around you. We constantly remind people that the people around you are much more important than the real estate—I’m not sure everyone understands how serious we are. Never “nickel and dime” with good professionals—you’ll regret it when you need their services.
We know someone who argued with a good lawyer over $150 difference in fees. He regretted it later when that particular lawyer was the ideal professional to help out in a sticky legal situation.
We run a pretty expensive piece of software to manage out databases but you can start with a simple spreadsheet.
Here are the categories you need to be building: professional contacts (lawyers, accountants, brokers, inspectors, appraisers), contracting contacts (roofers, plumbers, electricians, grass cutting services, cleaning services), buyers for your properties (other investors who may be buyers for your investment properties) and possible tenants (we regularly run ads for tenants even if we don’t have a property vacant).
Having a list of possible buyers and tenants for your properties is one of the “safety cushions” you should build for yourself.
Do not wait until you *need* a buyer or a tenant.
Always be building your database. Always.
Mattamy Homes is always building their buyer list for new homes. Trump is always building his buyer-tenant and buyer lists. You should be building yours.
When you meet other investors ask them if it’s OK to add them to your database and when you need to sell a property reach out to them first—other investors are also sources of tenants for your rental properties.
Until next time ... Your Life! Your Terms!