The Secrets to Raising Money to Buy Your First U.S. Multifamily Deal
- Michael raises private capital
- Michael has been an investor since 2004 and has syndicated 3 deals
- He has also renovated and sold over 30 single family homes
Unrelated to real-estate:
- Originally from Germany
- Dad worked for IBM so moved between Germany and US in childhood
What I Learned
Michael originally studied computer sciences and went on to found Web Methods, the software company that was purchased by Software AG. He read Rich Dad Poor Dad at 35 years old and this kick started his move into real estate. Michael originally raised the money he needed for investment from friends and family which helped him realize that raising capital is not limited by financial resources but by how many deals he could find.
The main question that Michael gets asked is how to answer this Catch 22; I don’t have a deal to raise money for vs I do have a deal so I don’t have time to raise money. The solution if you don’t have a deal yet is to create a sample deal and write it up as if you have it under contract. Tell investors that it’s not real but that it’s very similar to what you will find. This sample deal is something to get the conversation started to help build trust with the investor. Michael recommends that you leave the terms of the deal loose as you don’t know what the investor is looking for, eg keep the returns window between 8-12%.
When asking for money you must go in with confidence. Start by asking a series of questions where every answer is “yes” and give people a chance to say “how can I help you?” However, don’t rate confidence over experience and make sure you’ve done enough research to have answers to their questions.
The second problem people always raise with Michael is where to find investors. He suggests that you first start with your inner circle, then your second sphere (people you’ve lost touch with) before moving to people you’ve never met. Don’t ask for money from sphere one and two, just ask to meet up and run something past them. Use these meet ups to ask if they know anyone who might be interested in investing that they could put you in touch with, this will become your third sphere.
When meeting with an investor remember that they are more interested in the risks and downsides than the gain. Never say that nothing will go wrong, be honest and explain how you plan to mitigate the risk through your mentor/team/management. It’s always ok to admit you don’t know the answer, but make sure research the question and follow up after the meeting. Finally and most importantly be prepared to answer “what’s next?” so make sure you have the paperwork, the deal package, the operating agreement and money transfer information to hand.
Top Investing Tips:
- Most successful habit? – Getting up at 6am
- Most influential tool in your RE business? – The Syndicated Deal Analyser which is an apartment building investing analysis spreadsheet and available to purchase from sydicateddealanalyser.com
- Most exciting project right now? – Watching his students getting into deals.
- Most influential person in your career? – Robert Kiyosaki and his wife
- Most exciting deal to date – A house flip in Arlington Virginia that was bought for $150,000 and sold for $400,000.
For the Free ebook head to http://www.themichaelblank.com/ebook/