So here's the shocking truth about getting started with apartment buildings: you don't need to be rich.
In fact, you don't even need hundreds of thousands of dollars to get started with apartment building investing, because you're going to raise it from private individuals.
And here's the other truth: These individuals are going to be happy to hear from you!
This is because you're talking to them about the best investment on the planet, which is multifamily syndications. So they’re going to be glad to hear from you.
But how do you do this?
In this video, I'm going to show you exactly how you can raise money.
I’ll take you through how to unlock hidden capital with what’s out there and find and close small money investors, even if you don't have a network.
Check out this video to find out!
Where Do I Find the Money?
So whenever I talk about raising money, I hear people say something like this – “You know, I don't know anyone with money. I don't have any money. Where do I find this money?”
As an experiment, when I go to my local REO or a meetup and I'm speaking, I often ask people to raise their hand if to have at least $25,000 of real estate to invest in real estate, and a bunch of hands go up.
Then I say “Keep your hand up if you have at least 50,000 to invest.” Some hands go down.
Some stay up. Then I ask “Keep your hand up if you have a least a $100,000 to invest in real estate.”
Some of the hands go down, but some stay up.
If I count together all the money between everyone there – there would be millions of dollars in the room. Now, I don't know maybe any of those people. But there's a lot of money in the room and they're thinking about real estate, right?
These are not people you need to educate about real estate, it just shows that there's way more money out there than deals. I can tell you that for sure.
The thing I hear most often when it comes to raising money is, “Hey, I don't want to take money from friends and family.” That’s going to make Thanksgiving really awkward.
And my argument to that is that you shouldn't be taking anyone's money if you think you're going to lose it, number one. In this context, there is no difference between friends and family numbers and someone you met at a meetup or a coworker.
Honestly, it's the same. I have a strong opinion on this one and I actually have a blog post and video on the topic.
Read up on that if you're hung up, now you’ve got to somewhere to start. You gotta start with your sphere of influence and that's the way to do it. I call all this stuff hidden capital.
Hidden Captial is Everywhere
There's hidden capital everywhere for example, I remember meeting with a neighbor of mine, named Greg. I'm talking to him about multifamily syndication and getting very excited.
I mentioned towards the end of the conversation that the minimum investment is $50,000 and he goes – “Oh my God, I'm really sorry I only have a $10,000 to invest.”
I felt like I had wasted my time. Then I said, “Well – do you have any money in your IRA or 401k?” He said, “Oh ya – I’ve got like $400,000 in there.”
My jaw dropped. I said, “Greg, did you know you can actually invest with your IRA?” He did not know this. He was thinking about the penalties and interest and was concerned it was illegal.
So I explained to him the IRA investing and he couldn't believe it. This is the perfect example of hidden capital. Some people say “I don't want to have to beg for money.” You’ve got to change your attitude about that. This isn’t about begging for money. You're actually providing a service to them.
You’re Providing a Needed Service
These are the problems that people with money have: They can't get consistent, predictable returns. I mean, look at the gyrations of the stock market. Look at the crash in 2008. If I'm 10-20 years away from retiring, I can't make any reliable plans.
Most people are scratching their heads wondering if the stock market the only thing out there. Because they can't seem to make it work.
You come to them with, “Hey, let me tell you about an alternative to the stock market.” They're going to lean in a little bit. Then you say, also, this alternative option is actually relatively safe compared to any other investment in the stock market.
Then they'll lean in a little bit farther and you'll tell them that you're going to get above average, consistent, not volatile, but consistent returns that produce cashflow while you own it.
The stock market doesn't do that.
Of course – the taxes are almost zero. When you talk to them about that, they're going to be really, really interested in and they're going to want to ask the question, “well how do you do that?”
Then the door opens the to talk about syndications. So it kinda sells itself. This is why I love multifamily. So don't feel anxious about raising money. It's actually much easier than you think because a solution to a real problem people have.
The Sample Deal Package
You may be wondering how you do this. If you get a deal under contract and don’t have enough time to raise the money, that can be stressful.
On the other hand, if you don’t have a deal on a contract, what are you going to talk to investors about?
The solution to our problem is something I call The Sample Deal Package.
The Simple Deal Package is an actual investor package about a real property. It’s got photos, financials, everything about this investor package you create is actually real.
You get a lot, if not most of the information from the marketing package you get from your broker. The only thing that's not real is that you don't have her under contract.
Now, you tell your investor this, but now you have a reason to actually talk to a potential investor.
You can sit them down if they're interested in lunch and you say, “Let me show you a real deal. Now I don't have a contract yet, but let's pretend for a second that I do. I want you to take a look at it and ask me whatever questions you may have.”
This is a conversation piece and it gets the major questions and objections taken care of right up front.
What is multifamily? Why should I invest in multifamily? What are the pros and cons? Why should I invest in you? Who is your team and what's your track record?
All these questions will come up during the meeting. The goal of a sample deal package is to get a verbal commitment from that investor.
Taking the Next Step
After someone is comfortable with the idea of investing in multifamily and with you, you can say, “Hey, if I found a deal that substantially like this, how much would you be interested in investing?”
They might say $50,000 – $100,000 and that is your verbal commitment and that's what you're looking for.
Now if you want to see more about this sample deal package, it's actually an appendix of my free ebook called “The Secret to Raising Money to Buy Your first Apartment Building”. You can download it for free!
Obviously, this will show you the secret to raising money and explains it a lot further. There is actually a sample deal package laid out for you at the end of the ebook.
The other cool thing is you don't need a lot of investors. It's not like I needed a hundred people.
Imagine five people that say, “My gosh Michael if you find me a deal like you just showed me, I really like this a lot. You know, I'm in for $50,000.”
Five people – that's a quarter-million dollars behind you.
Now if you had five people at $50,000 each, how confident would you feel making an offer on a million-dollar property? Very confident, right?
I got investors behind me. So this changes the entire way that you show up and you're talking to a broker because you have five people investing with you. This is really why I love multifamily because you don't need a lot of people and it literally sells itself.
As you can see, raising money is actually much easier than you think. First of all, because of the investment that you're proposing to investors. The use of the sample deal package really helps us cement and get those verbal commitments from people way before you actually get a deal on a contract.
So go out there and raise some money and I'll talk to you guys later!