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Real Estate Investors ?

Discussion in 'Real Estate Investing' started by lkn2bfd, Sep 26, 2007.

  1. lkn2bfd
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    lkn2bfd New Contributor

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    So what would be the best way to find real estate Investors and when you do find them how would you convince them to trust you with their money ?
     
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  2. SteveO
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    SteveO Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    The first thing to do is show them your experience and expertise. It would be difficult to find investors without some sort of track record to lean on.

    Another option is to find an incredible deal and back it up with strong numbers. This is a much more complicated process. You will need to convince the sellers that you have the means while finding investors to put up the funds.
     
  3. Russ H
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    Russ H Gold Contributor Read Millionaire Fastlane Speedway Pass

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    This is what REIs look for::

    1. A track record of consistent growth and fiscal responsibility.

    2. The ability of a group/person to buy under market, and improve value.

    3. The ability to get a good mgt team in place.

    4. Able to turn units quickly when vacant.

    5. Low vacancy rates and back up waiting list at current properties.

    6. Competitive rents w/area.

    7. Keeps on top of both regular maintanance and large repairs.

    *******

    If you don't have a record of this, you need to start by:

    1. Having a great credit score.
    2 Working and putting away enough for a downpayment on an investment property.
    3. Buying a property w/great potential at 70% of full market value ("FMV"), or less (bearing in mind that any needed repairs are deducted further from the 70%).

    **********

    An example (numbers kept simple):

    10 unit complex (2 Br, 1 Ba units)

    Each currently rents for $400/mo b/c property is run down.
    With improvements, competitive rents are $500-550/mo

    Building is worth $500,000 at FMV.

    Seller is willing to sell for $350,000 (70% of FMV).

    Building needs $50K in repairs/upgrades to bring it to FMV.

    So, purchase price needs to be 350,000 - 50,000 = $300,000 to satisfy above rules.

    You purchase property for $300K, repair/upgrade items, fill with good tenants, have good mgt in place and take care of items listed in first list, then repeat a few times.

    After several of these successes, you will see that investors come to you.

    That's what has happened to us (w/houses, not multis).

    But we needed 4 sucessful projects under our belts before serious investors were interested.

    Anybody else?

    -Russ H.
     
  4. Russ H
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    Russ H Gold Contributor Read Millionaire Fastlane Speedway Pass

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    bump.
     
  5. Diane Kennedy
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    Diane Kennedy Bronze Contributor

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    One of the best strategies I saw with a newbie to getting money went like this:

    - She and her husband had successfully flipped and/or rented out 4 SFR in S California.

    - She found a smaller commercial property and put together a very professional prospectus (We've talked about software in another thread that can walk you through this).

    - Her offer was to money partners with her doing ALL of the leg work. She took only 3% of the first deal.

    - First commercial property was a great success and she collected testimonials and was able to show proof of huge returns.

    - The next deal she put together made her a lot more money. The idea with only taking 3% on the first deal was simply so that she could establish that track record with other people's money. She only made pennies per hour in that first deal, but it didn't matter. She built credibility.

    What I look for:

    My husband and I are now at the place that we invest occassionally in other people's businesses and real estate projects.

    - In every single case, we invest in the person. What is their track record with relationships? Ie...if they had a former partnership, do they still talk to their former partner? Do they "trash talk" other people or deals? (If so, not interested)

    - We want to see that they can handle their own finances (if they're broke, we're not interested).

    - When do they get paid? And under what circumstances? If they want to take a salary or draw in the beginning, not interested.

    - To be honest, we're total PITA (pains in the a**) at the beginning. It's a test - we want to see how responsive they are to phone calls and emails. If they are blowing us off in the beginning, they will in the end. We're not interested.

    - We look for a "test" of the relationship if it's someone brand new. We don't suddenly give them a million dollars, if they've never done that kind of deal before. We do a small deal, maybe just a SFR, or a small joint venture (if it's a business) first. If it goes well, then we are prepared to ramp it up.

    - We want clear and well-thought-out responsibilities laid out. We call it the "no money, no credit, brilliant idea" people. At least 3 times a month someone contacts my office with a "brilliant idea" and they'll let me put in my expertise, money, personnel for 50% of the deal. Of course, before they tell me, they want a NDA and non-compete. I NEVER sign those. Period. We've got plenty of ideas - it's execution that we need help with.

    Without a doubt, we're harder to get money out of then a lot of other people out there. That's because I've seen all the deals that have gone wrong and how quick some people are to blow other people's money. I'm pretty skeptical and need to be convinced.
     
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  6. Russ H
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    Russ H Gold Contributor Read Millionaire Fastlane Speedway Pass

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    Brilliant.

    It always surprised me how many posts we got on RD that were, essentially:

    "I have no money and bad credit. What do I need to do to get investors to give me their money?"

    My answer:

    -Make your own money (enough for a down payment on a property)
    -Clean up your credit
    -Be consistently reliable and financially responsible for several years
    -Do a few deals on your own to show you can do it.

    Sad thing was, no one ever took this advice. They just kept on posting "How can I get other people to give me money if I'm broke?" questions.

    BTW, lkn2bfd, please know that I'm not talking about you here. I don't know anything about you.

    I'm talking about folks who have no money, no credit, no experience, and want someone else to give them money to learn how to do something.

    Aside from parents, I've never seen anyone do this. :)

    -Russ H.
     
  7. hakrjak
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    hakrjak Bronze Contributor Read Millionaire Fastlane

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    Haha, so true, so true....

    My answer -- "Stop being an idiot!"

    -Hakrjak
     
  8. lkn2bfd
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    lkn2bfd New Contributor

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    No offense taken I don't really expect some one just to trust me with there money. I really don't want someone else's money I would rather do it some how with my money. I'm the type of person who learns from hands on experience and not from reading or watching. I don't want to look like a bum or a Beggar I want someone to take me under there wing like an apprentice be a mentor make me work for it I want to earn it. I know just enough about business to aggravate me in other words I know a little about everything but not a lot of one thing
     
  9. Russ H
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    Russ H Gold Contributor Read Millionaire Fastlane Speedway Pass

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    lkn2bfd-

    You may want to consider being an apprentice to a successful RE investor. This opportunity comes up only occasionaly, but essentially, you work like a dog for next to nothing, and learn lots of great things.

    Patrick Cripe on the RD boards did this for a year or two, and learned enough to retire after only a few years.

    Worth looking into. Go to local RE investors meetings. If folks see you as sharp and willing to work hard, the opportunity may present itself.

    -Russ H.
     
  10. lkn2bfd
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    lkn2bfd New Contributor

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    Russ

    That is exactly what I would like to do. I work for a local government entity, at this place I will always be an employee nothing else. If I could find someone to mentor me teach me the business side of things they would be wonderful believe me I know the work side of it been in the construction industry all my life Thornton co., Poured concrete walls you name it I think I've done it. anyway how would you go about finding the local real estate investors meeting and would they just let me walk in or would I have to join ?
     

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