[Since we are into one of our phases of acquiring properties, Russell has been interested in finding out how new investors go about figuring out the best time to get funding for new projects! Read on!]
I went to an investor meetup the other day and threw out a question for the sake of the beginning investors in the room. The question was, “What’s the best way to secure funding for your first deal, when you need to have funding in order to secure your first deal?”
If you’ve never done a deal before, how do you prove to potential lenders that you’re a good risk? If you’re not secure in your financing (and aren’t independently wealthy) how do you reassure potential sellers that you can actually purchase that first property?
While several variations came out in the responses, the recurring theme was quite simple – networking. You simply have to attend networking events on a regular basis. This lets you:
- Meet lenders and find out what they have to offer.
- Meet experienced investors and offer to partner with them.
- Meet other investors and offer to lend your money as a way to get established.
Meet lenders and get to know them. Follow up the exchange of business cards with email or a phone call. Find out what their terms are and how they operate (like lead times, what they require from you, how quickly they can close, etc). Ask what it would take to get pre-approved with them. If you can get them the majority of the documentation they’re going to require anyway, you’ll be that much further along when it comes time to do that first deal. Ask them if they can issue you a proof of funds letter and, if so, for what range of figure.
Also, keep in touch with them. Don’t become a pest, but set yourself a reminder to ping them on a monthly basis to let them know you’re still in the game. Keep in mind that, just because they may have funds this month, they’re always looking to lend those out. They might not be in a position to lend exactly when you’re ready to borrow.
If you’re a beginner investor, just say so. Introduce yourself and let them know that you’re hoping to find an experienced investor to partner with to get some experience. There are so many tasks that have to be done on any one deal that most experienced investors would appreciate the assistance. Besides, most experienced investors attending such networking events have a sharing mindset. Partnering is understood to be part of this business. Even though, by definition, you’ve never done it before – they have (in all sorts of roles) and they know how you can be of use to them. Partnering on a deal can get you exposure to the process, but also can help their lender(s) get to know you.
Lend your own money
If you can, introduce yourself as a potential lender. Investors are always looking for funding of various sorts. Even if you can’t fund a purchase, you could fund a rehab or provide transactional funding. Again, simply being in the game gets you a lot of exposure to the other players.
Networking is the key
Everybody has to start somewhere. If you’re a beginner who’s still looking for that first deal, you can still make the necessary connections to the people and resources you’re going to be needing soon anyway. Attend networking events, get your elevator pitch down, meet lenders and investors, let them get to know you, keep in touch, and keep showing up.Hermann says please like and share!