Posted on January 02, 2012 by CJ Article Team

Getting the right private investors to finance your investment property purchases comes down to a simple formula:

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.”

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