In today’s episode of the Self-Storage Podcast, we’re continuing with our mission to share knowledge and skills. Today’s guest will help us figure out the basics of attracting capital for real estate investing. He’s Dave Dubeau – an entrepreneur, author, speaker, and expert on raising capital in the real estate sector.
Dave began his real estate investing career in 2003, and he’s since invested in multiple lucrative deals, from rent-to-own to multi-family homes. Lately, he’s been focusing on connecting people and helping mom-and-pop investors find partners. By using his 5 Step Money Partner Formula™️️, Dave has helped many clients grow their portfolios by attracting investors (instead of chasing after them). Now, he’ll tell us all about it.
Attracting Capital for Real Estate Investing
Most people that actively invest in real estate hit a money wall sooner or later. You want to grow your portfolio and get in on larger (and more lucrative) real estate deals, but you lack resources. Moneylenders can often offer you unfavorable terms, so you need to find a better way of attracting capital for real estate investing.
While raising capital seems like a difficult journey of cold calling, it doesn’t have to be! Capital raising is, as Dave says, all about quality marketing. Intelligent marketing and targeting will get investors to come to you instead of forcing you to chase them. Dave has established a formula that will help you get enough money for real estate projects with ease. Before you take a starting position, of course, you should consult with a lawyer to make sure you’re raising capital for real estate legally and within the jurisdiction of your state.
Raise Capital for Property Investment – The Winning Formula
Which comes first, the money or the deal? Sometimes people might say, “Find a good deal, and money will come to you.” Unfortunately, this isn’t really the case. All you’d be left with is a missing opportunity because you couldn’t raise capital on short notice.
Try to change your philosophy and raise money before you find a great real estate deal. Gather a group of investors and get ready to go before you start looking for income-producing properties. You’ll even get a better negotiating position since you already have capital ready.
Starting from Scratch
You’re an unknown investor and entrepreneur looking to raise capital, and you’re essentially starting from scratch. The general public doesn’t know you, and naturally, they are more hesitant to put a decent amount of money into your hands. So, let them get to know you! Build relationships with investors and position yourself as a go-to real estate professional. After all, business is about credibility.
Better yet, work with individuals who already know you as a person. Activate all your past connections and filter those that can be potential real estate investors!
Since you’re starting from scratch, you also need to be set up properly in a legal structure. You need to get the needed licenses to avoid fines or any additional legal penalties. Get informed about all necessary paperwork first, and then move on to connecting.
Step 1: Target Group of Investors
The goal is to create a target group of potential investors and focus all of your attention on them. How do you do this? Simply go from bigger groups to smaller ones!
Start with creating a list of at least five hundred people with whom you have a preexisting relationship. These can be family members, friends, business associates, colleagues, sport and church groups, etc. Gather contacts from all resources (from phone numbers, email lists, social media, etc.) and export this giant list into an Excel spreadsheet. Then, filter down to two hundred persons that can potentially invest with you.
Don’t just go asking for money yet – that’s tacky and often ineffective. Spamming will push people further away from you, especially if they haven’t heard from you in ages. Instead, contact these two hundred persons individually and reconnect to them first on a personal level. Only after you’ve built good relationships can you talk business.
The transition from “catching up” to shifting the conversation toward real estate can be difficult. You can present potential investment opportunities after a few weeks, but you need to approach the topic casually. With the said transition, you can leverage the usual email marketing techniques to nurture your prospects.
Step 2: Million-Dollar Investor Presentation
If and when somebody replies to your emails, you must be ready to answer. You can’t pitch anything without a coherent presentation, so make sure to create a million-dollar presentation. Walk people through your bio, the basics of real estate investments, and your niche (such as self-storage in commercial real estate), the benefits of different opportunities, and some of your past deals.
The goal of this presentation (or meeting) is to get an expression of interest or letter of intent. You need to draw attention to yourself and spark interest. When it’s time to put the deal in front of your list, they’re more likely to raise their hands and invest with you.
Step 3: Market Yourself
Education (in a slightly entertaining format) and marketing will get you far. People usually don’t care about real estate, so you don’t need to present them with facts, data, and other “boring” information. You just need to show them that YOU know all of this stuff and can get them high returns on their investments. The basics of marketing (even one specific tactic) will help you convert those leads into new investors if you’re consistent.
Step 4: Become an Authority
You don’t have to be world-famous, but you should establish yourself as an authority for these two hundred men and women. More important than the exact real estate deal is the person who is offering it – you. People must trust you and believe that you’re an expert before they decide to put money into your project.
There are lots of things you can do to become an authority in the eyes of others, from presentation (looking professional, taking quality headshots, having a good website) to speaking about complicated things in simple terms.
Step 5: Snowball Effect
Once you get a couple of happy real estate investors, you can get the snowball rolling. You’ll be raising new capital for real estate deals with testimonials and warm referrals. It’s crucial to make those first messages as effective as possible.
Attract Real Estate Investors for Self-Storage
This strategy, as Dave put it, is going after low-hanging fruit from a tree. Instead of reaching for far and often unavailable leads, try raising capital from people who already know you and like you. All you need is to show them they can trust you with their money.
In a commercial real estate niche, such as self-storage, this strategy can work like a charm. People don’t know much about this niche, so you have the opportunity to educate them and show them the path to success.
For more advice on how to ensure your self-storage business is a success, check out our FREE Blueprint that will provide you with all the information you need!