Ready + Willing + Able = Private Money

Keep this formula in mind as you prospect for private lenders and equity investors. It’s hard to sell ice to Eskimos. What prompts me to write this is a simple fact I’ve discovered in my years of buying real estate with private funding: getting investors is a marketing process, much like looking for investment properties to purchase or getting qualified tenants for rentals or getting the right buyers for a retail house flip. Targeting is all important.

Far too many real estate investors don’t view private money as a marketing process – they view it as a finance process, sort of like getting a mortgage, where you just fill out some paperwork and pray the loan approval gods find in your favor. Your greatest success raising funds will be to provide an opportunity and to attract people to that opportunity. Very different from getting a mortgage.

Just like it won’t make you much money to try selling a high end luxury home to someone with $2,000 in their pocket and a 480 credit score, you won’t net much private money from people who aren’t ready, willing and able to invest money with you. Actually, the “ready, willing and able” is a bit out of order- it should probably be: able, ready and willing. Allow me to explain further…

Able – The private investor has the financial means to place funds with you. Their income and net worth justify an investment time horizon of 3-5 years or longer. They don’t plan on living off of their investment returns from you. They are investing money from savings or other investments and not from borrowed funds.

Ready – Timing, as they say, is everything. Timing is an important component of the private investors decision. For tax reasons, estate planning, personal/family planning and other issues, the timing of when the investor is placing their funds with you can make the hundred thousand or million dollar difference. Bottom line: the private investor must be ready to write the check or move funds when you propose your deal or you are likely wasting a great deal of time.

Willing – The investor must be willing to write the check. This means they must be convinced yours is a good opportunity and that you are a good fit to do business with.

You’ll find many people are ready and willing but not able to invest with you. You’ll also find people that are able and willing, but not ready to pull the trigger. The key to getting private funding in a hurry is to qualify the private investor as soon as possible in the relationship. This can sometimes be a challenge. To this, I suggest one great qualifying mechanism for you that has worked wonders for me in spending my time with the right private money investors: The Investor Questionnaire.

An investor questionnaire is a document, approximately 3-4 pages, which the prospective private investor completes prior to investing with you. The investor fills out information about their income, assets, investing background, risk tolerance and financial goals. If you have a prospective investor complete one of these, it actually serves two purposes:

1. it qualifies the private money investor – determines if you should spend additional time with them

2. it serves as developing a ‘substantive relationship’ for securities law purposes – can enable you to sell securities with exemption from registration – such as Regulation D offerings

The sooner you allocate your time toward “able, ready and willing” investors, the sooner you’ll unlock the key to the Holy Grail of real estate investing. Remember this old business axiom: “Never try to teach a pig to dance. It’s only gets you messy and it annoys the pig.”

Article Source: http://EzineArticles.com/3513790

Here we are in the land of Capitalism and young people aren’t taught in detail what Capitalism is and why it is so powerful. Why is that? With just a little education, their lives could be changed dramatically for the better. Perhaps this article will be the start of that change.

While the older investor has more experience and more knowledge about investing, the young investor can produce vastly superior results. Is that hard to believe? Well, it will become obvious in just a minute when we discuss the power of compound interest .

But before we get to that point, here is another reason this article will seem peculiar to a lot of readers. This is January 2009 and the stock market has taken one of its worst hits in modern times. And, to make matters worse, we are in a recession that no one is sure how long it’s going to last.

If you’re like most people, you will think this couldn’t be a worse time to invest in the stock market. I assure you, if don’t intelligently, it is a great time for the young investor. It can lay the foundation for them to become financially independent. Now that’s something to be excited about.

As you will soon see, the young person today should not wait to invest until they are older no matter what condition the stock market is in because it can end up costing them a tremendous amount of money.

The World’s Most Successful Investor

It goes without saying that the particular stocks a young investor buys will make a major difference over time when it comes to results. So that is where we must begin our journey.

The world’s most successful investor is Warren Buffet. One of his rules for investing is to buy only stocks that you would keep for a lifetime. When you do this, the movement of stock prices in the short run will not bother you as much as it would a person who is a trader. Buying only stocks you are willing to keep for a lifetime is one of the most important things you can do if you want to become an intelligent investor. Even more so for the young investor.

Beginner investors think that the way to make money in the stock market is through trading. Wrong. That is a formula for investor suicide. Warren Buffett did not become the world’s most successful investor by trading. He is living proof that buying stocks you would keep for a lifetime is the way to go. Life leaves clues. Warren Buffett’s strategy is a major clue for investors.

Instead of buying stocks to trade, buy good stocks to keep. In the long run, in addition to paying less in taxes, you will get the advantage of stock dividends growing over time as well as the ability to put compound interest to work for you. We’ll talk more about compound interest in just a minute.

So Rule 1 for the young investor is:

Buy stock only in companies you are willing to hold for a lifetime.

Rule #1 explains why this moment in history is not a bad time to buy. In fact with the market down, the young investor will buy at lower prices than they would have only months ago. If you are going to buy stocks you’d keep for a lifetime, the lower the price the better.

Now let’s talk about the next step in buying stocks for young investors.

Rule 2:

Buy companies who are #1 or #2 in their industries.

Warren Buffet calls this strategy – buying stocks with a wide mote. Old time castles had motes around them that would make it difficult for invaders to cross at times of war. In regards to companies in the modern day this means the company has developed a business that would be very hard for competitors to re-create and compete against. Warren buys stock in companies like Coca Cola and Gillette. The young investor needs to use the same strategy.

Think about it. Since you want to buy companies you’d keep for a lifetime, they need to be able to survive a lifetime. A wide mote goes a long way towards insuring survivability.Now, onto the next rule for the young investor:

Rule 3:

Buy stocks that pay a dividend.

Over time you want your stocks paying you cash so you can buy more stock. In a minute we’ll talk about Dollar Cost Averaging. But to do Dollar Cost Averaging you need some cash to invest. You’ll need more than just the dividends, but the dividends will help.

Rule 4:

Apply Dollar Cost Averaging to your investing strategy.

Dollar Cost Averaging means you don’t buy stock in a company all at once. You buy it in bits and pieces over time. For the same amount of money, you will be able to buy more stock when the price is low and less stock when the price is high. The average price you pay will be lower over time which will mean greater profits.

By applying the above four rules, a young investor will be in a position to put the power of compound interest to work. This is the young investor’s edge over older investors. Through compound interest, their money makes them more money which makes them still more money and so on. Over time, it really adds up.

It’s not the amount you invest that matters, it’s the plan that matters.

When first starting out, the amount available to invest will probably be pretty small. That’s okay. It’s not the amount that matters most; it’s the plan that matters most. A young investor’s goal should be to become a disciplined investor.

Start the first investor fund no matter how small. Yes, the goal in the beginning is to just accumulate some money. After all, you have to have something to invest with. Every young investor starts here. But over time, it will really add up.

Most of the growth in an account which grows from compound interest will occur in the later years. That’s the way it is. At first, growth will be very small. Patience is required. But that patience will pay big dividends as the money compounds year after year.

The average investor doesn’t have a plan to increase the amount they have to invest. They go about investing haphazardly. Don’t be like the average investor. When money comes your way, whether through work, chores (for the young investor) or gifts, pay yourself first. That’s the key. Put some money away with which you can invest when you have accumulated enough.

Paying yourself first moves you from being an average investor to being a smart investor. An investor who keeps the big picture in mind, the end result.

What is the end result? That’s simple. The end game is to become financially independent. And you do that by putting into action a plan which makes it possible for your money to bring you in even more money. This is accomplished through the power of compound interest. That is what the intelligent investor does. He puts him money to work so he doesn’t have to.

When I read the book “The Intelligent Investor” by Benjamin Graham (Warren Buffet’s mentor), I took particular notice of one important idea. Benjamin Graham said to not go after spectacular results, instead to go after adequate results. Now that’s strange isn’t it? Adequate results instead of spectacular results. Why would he say that? Here’s the reason: if you go after spectacular results you will become a speculator and the idea is to become an intelligent investor.

No one can time the market. Don’t speculate. Invest for the long term. All you need is adequate results enhanced by compound interest. Do that and you will be one of the most successful investors there is.

What you want to do is look for real value. Buy great companies and don’t mess with the rest. When great companies go down in price because of some temporary setback, it becomes an opportunity to add to your holdings.

By being choosy about the companies you buy, you become a value investor, not a speculator. That’s what Warren Buffett is. He’s looks for great values, buys when other people are selling and in doing so, has become one of the richest men in the world.

A beginner investor becomes an intelligent investor by following the general principles outlined above. Here they are again:

Rule 1 for the young investor:

Buy stock only in companies you are willing to hold for a lifetime.

Rule 2:

Buy companies who are #1 or #2 in their industries.

Rule 3:

Buy stocks that pay a dividend.

Rule 4:

Apply Dollar Cost Averaging to your investing strategy.

By doing the above with discipline, the young investor will put compound interest to work for them and in the long run they will make a lot of money. They will become financially independent which is something we all wish for but which is something few achieve.

Article Source: http://EzineArticles.com/2023543