Funding Real Estate Deals: Can You Say Friends And Family

Funding real estate deals is obviously an important component for any investor that wants to do multiple deals. This is probably even more true today, with the state of lending and the economy. So what is an investor to do? Well there are several means outside of the conventional and one which you may not have considered. I am going to site a very successful investor, you certainly have heard of, and his strategy and how this may work for you, too.

Warren Buffet is an American investor who earned a huge fortune from wise investments. He lives in Omaha, in a house that he has been living in for the last 45 years. He is the second richest man in the United States and recently gave the first richest man in the United States $37 billion dollars to handle for him. He donated it to the Bill & Melinda Gates Foundation to manage.

When he was a young man just home from graduate school a few decades ago, he was convinced that you should always buy based on the fundamentals and not worry about trends, what other people were doing, or even what the buzz on Wall Street was. So he wrote a thesis and mailed it to 272 of his closest friends, neighbors, and relatives. Basically it said, “Here’s my philosophy. I’m not going to take a job. What I am going to do is start a fund that will only buy on the basis outlined in my philosophy. I will walk over broken glass to make sure that you don’t lose a dime. I will have 100% of my net worth at all times in the fund.”

Then he just mailed the letters and waited for people to send checks to him. While he waited, he started calling on people. He signed up a large share of those 272 people at some point or another. If you had been one of Warren Buffet’s original investors, you would be quite well-to-do today.

He knew that he couldn’t just run an ad in a newspaper since he was a kid hardly out of college. He had to deal with the people he knew best and who knew him best. Many people of good character thought a lot of him and invested their money. Some of them invested just a little money at first and then more later on. But surprisingly enough, over two-thirds of the people to whom he wrote letters became stockholders in that first month.

You need to do that, too. If you can’t get an owner or a tenant to invest with you, start with the people to whom you are closest-that know you the best. They are the ones most likely to give you money. Perhaps it seems to be counter-intuitive to ask your best friends for money because you don’t want to ruin that friendship, but consider these key points.

Key Points:

If your deal isn’t good enough to ask your Mom to invest in, you should not consider the deal. If the deal isn’t good enough for your friends or family, it may not be a wise starter deal for you. So get out there and set up the best possible deals. Only show people the deals that are under contract. Otherwise, they’ll feel that it’s their prerogative to dictate how your deal is structured, and may act like your senior partner. Show them why it’s such a good deal, but if they’re not convinced, they simply don’t have to invest.

Now you may have to get outside your comfort zone to initiate this technique or you may quickly find out ‘Who Loves Ya Baby’. However, if you are knowledgeable and confident you can do good deals and prove yourself, then it is likely you will find people to invest with you and most likely more so in the future if they are getting a good return on their investment. So funding real estate deals from external sources will take some leg work and effort, but it is a doable proposition if you approach it in the correct manner and perform on your promise.