Real estate investments always require capital.
But you don't necessarily need to supply that capital yourself.
If you can find the right investors who bring their own capital to the table, you can make a ton of money by doing the legwork that they don't want to do.
Additionally, connecting with the right investors can payoff in experience, connections, and being a part of more deals than you would otherwise.
In this guide, we'll teach you everything you need to know to find real estate investors with capital and leverage them to make money.
Let's dive in.
The Pros and Cons Of Working With Investors
What are some of the benefits of finding and partnering with an investor?
Pros:
Get the funds you need to acquire and execute deals
Use the extra money for bigger more exclusive deals
Reduce your risk in the deal through LLC(s) and OPM (other people’s money).
Exchanging sweat equity for financial equity. Win-win.
Spread your resources across more deals. Leverage and growth.
Allow others to participate in your success - relationships.
Shorten your learning curve by having an experienced team.
Obtaining better terms on financing.
Participate in joint ventures including co-wholesaling.
Cons:
What are some of the disadvantages of bringing in partners?
Splitting the pie - having to “lose” profits.
Relinquishing power - giving up 100% control of the deal
Answering to people - accounting responsibilities.
The human factor - unloyal people.
Disagreements about the deal structure and signing.
Now that we’ve covered some of the basics for and against approaching investors, we tackle when is it time for you to bring them on board.
When Should You Consider a Real Estate Partner?
The best kind of partnership, in any business, happen when the parties collaborating bring skills to the table that the other parties don’t have.
Meaning you are valuable to the team/partnership.
Often in real estate, one party gets a lead or tip on an amazing deal, but lacks the experience in making the deals, and lacks capital or legal literacy.
So, when should you bring an investor to your deal?
Here is a list of examples of times where realtors look for money from investors:
In advance – when scouting for new property deals, and you know you’re hunting big.
When you want to earn confidence from future investors and lenders.
When you want to speed up the process of growth.
When launching real estate crowdfunding campaigns
When other types of financing cannot be used.
To reduce the cost of leverage.
When you get stuck with equity but no liquid cash.
When taking on a new type of real estate deal.
Another example, usually done by wholesalers, is obtaining a low LOAN-TO-VALUE asset-based loan when buying a property and using the investor’s money to make improvements or rehabbing.
Where should you start looking for investors? And who is a good partner?
Who Makes a Good Real Estate Investing Partner?
Here is a list of people/groups you can start approaching today. Regardless of who you choose, make sure you have the agreement in writing. Even if it’s your family.
Family members
Friends
Angel investors
Venture capital firms
Real estate investment groups
Other real estate investors
Accredited investors groups
Local government and real estate and housing organizations
And here is a list of what and who you’d like to avoid as your investor partner.
Who to Avoid As Your Real Estate Investor
Here’s a list of things that you want to avoid at all costs, and will be a nightmare of energy drained and money lost in your real estate ventures.
Risk-averse, difficult partners - that make it hard to make money.
Control freaks - overly involved partners that drain time and energy.
Backstabbers - partners that may try vote you out, or cheat you on pay.
Low-performance, unavailable, unreliable, deadline missing, forgetful, ignorant people.
Partners who value money more than relationships. It will forever ruin your reputation in the industry
Protect yourself from what you can with creative, strict clauses in your legal contracts.
Now that we understand the fundamentals, here are ways to find investors, as promised.
How to Find Real Estate Investors for Partnerships
It’s usually best to start looking for partners among those already in your network.
Note that when you approach others outside your network for funds, they may want to know how many of your close circle have or have not backed you – and why.
Make sure you’re prepared to answer that question.
Remember, money follows opportunity – so don’t be afraid to share the great deal you’re working on. This is especially true for wholesalers who are developing cash buyer relationships. Keeping them in the loop on upcoming deals can create a powerful relationship for continued deal flow.
Targeted Networking
Simple. Your focus should be on meeting people who:
Have the money to invest in real estate
Know how to manage real estate or a business
Are interested in investing with a partner in real estate
That’s all there is to it. Where to find them?
Start attending local events or places of gathering where these types of people flock to.
Such as:
BNI groups
Your local Chamber of Commerce
Toastmasters groups
Yacht Clubs
Gyms in wealthy parts of town
Golf clubs
Fundraiser events for charity organizations
In sales, and in real estate, in particular, appearance matters. So make sure you get yourself a business card and some nicer clothing attire. And yes, a fancier car can help.
Also, a decent-looking website is necessary. Nothing too fancy. Just a few clear pages about your investing business and who you are. It’s not a must but will present you in a better, more professional light.
Real Estate Investment Clubs
If you live in a large city, it is likely that you’ll find an investment club to join.
Just type in Google “real estate investment club in [your city]”
OR
Search Google for a local Real Estate Investor Alliance (REIA)
These clubs exist for the sole purpose of learning about investing and networking. These clubs are full of people who are investors already - or very interested in becoming investors.
Some clubs require a fee to become a member, but we have a feeling you understand the ROI and ROT here will be worth it, let alone the relationships you will develop.
You can also try meet.up.com where they have groups with mutual interests.
There may also be smaller, more private clubs that don’t advertise themselves. In that case, you need to learn about them through the grapevine of people you’re talking to. As you build new relationships with small business owners, real estate agents, etc. you will get hear about the groups.
Online Resources
If you live in a smaller city, go online for resources.
Look for angel investor clubs in your local market, and even out of state or international groups.
Find forums, Facebook groups, and dedicated websites with memberships. Become an active member and see who are key individuals in the community are.
When you have established yourself, send a private message introducing yourself and asking for a phone meeting.
Bank Financing
Yes, its how banks “survive” and it is what they were made to do - lend money.
They finance loans.
However, banks usually require higher down payments and bend you on the APR. Remember, that’s how they make their money. The riskier the deal is, the more debt to income will be required on your end.
Obviously, rental properties are a riskier investment than owner-occupied homes.
Less risky: Mortgage to own
More risky: Mortgage to let (rent).
So, unless you have an established track record with real estate investing, and high income, you probably won't get a bank to fund one of your riskier projects.
Realtors
Real estate agents know the market best, due to their daily mingling with sellers and buyers. This makes them a great source, and you should befriend some agents and ask them to connect you to investors they know.
They can point you in the right direction at the very least. (phone numbers/emails).
Property Managers
Property managers’ entire job is to work with landlords and investment companies.
Even if the only investor they know is their client, that’s better than nothing.
Simply put, talk to others who lead the industry, and are able to connect the dots and open doors for you. When starting out, one email or phone number can change your entire 1st year.
(TIP) Present a Plan
Before approaching investors of any kind, you need to have a good idea of all the numbers and moving parts. It would be more impressive in methodical writing, possibly even a presentation.
Any investor will want to know why you are choosing to buy in that market and what the margins are for the investment.
Prepare any rehabilitation budgets, list your resources, and think of showing case studies exhibiting your previous success projects (which involved) your experience with buying, building, fixing, or selling homes.
Set exit strategies and timelines as well.
Most importantly, make it simple to understand. Make it easy for potential investors to see what the upside is for them - to gain confidence in you to execute the plan.
Remember, a real estate investor sees a lot of people presenting deals; stand out by being a professional.
And here is something you won’t find quite often.
How Investors think from their point of view, and what they look for in Realtors, and what you can do to increase the likelihood of working with them.
What Investors Look For in You as a Realtor
It is a rare ability in life to be able to look at things from a birds-eyes-view, from the other sides’ perspective, being in their shoes.
It is a valuable skill for salespeople, high-end negotiators, and for Realtors--to know what the clients want.
As a real estate player in the space, you’d want to know what investors are looking for when choosing realtors to collaborate with.
Here are 5 parameters that investors use to consider you as a partner.
1. For you to be more than just a property presenter
Any licensed real estate agent can find a property for sale, schedule the showing, and open the door.
But investors will look for more in you than that.
You would like to have access to off-market or pocket listings, some way of knowing about upcoming deals before they hit the market so the investor can get an edge up on the competition.
Investors expect you to be able to find a property, evaluate the deal, know the "comps", and be familiar with the marketplace you work in. (state/city).
Investors are looking specifically for realtors who are very able in their abilities to estimate a deal properly. The price tag means absolutely nothing to them, and they want more information and subtext.
2. For you to be knowledgeable when it comes to renting
Investors will expect you to know the market you deal with like the palm of your hand. How long properties are sitting on the market, the average sales price of certain areas, what schools are better rated, and where municipal funding is going to be invested.
You should know about upcoming development projects, zoning ordinance changes, and amenities and attractions in the area. You should be familiar with the local schools, where the nearest shopping and dining areas are, and how public transportation and parking is in the neighborhood.
You should be the expert in the market you sell in. You should be up to date on real estate and economic policy news, housing statistics, you should enjoy browsing real estate blogs, use real estate apps, and read news sites to stay up to date so you can better inform your clients of what’s going on.
Lastly, don’t forget about the rental market.
Knowing by heart the rent prices by area and the overall stats of the rental market is a good way to get investors to work with you because they will depend on your expertise when pricing and renting out their investment property.
Think about learning more on the rental market by taking a class from your local real estate association, brokerage, or following a leasing agent.
3. For you to be an above-average negotiator
If you chose real estate as your path, you better know how to sway a deal in your favor. Regardless of what type of deal, or what type of client, having good negotiation skills will earn you respect with investors - for whom money and percentage count the most.
For investors, business is a contact sport. And each transaction is a game. They want to win.
Even when helping on a deal you aren’t currently working, you should be able to assist with input and advice--how to get the best possible deal on buying or selling a property in the shortest time period.
When sending multiple offers to different properties, remember that the other side will likely try to “low ball” you by dropping a very low anchor. If you are emotional, your reactions may not represent what is best for your investor partner, and you should develop a thick skin.
Keep in mind, everyone has different styles of negotiating, and sometimes quiet people end up being the best negotiators.
Our tip to you is, when negotiating, don’t solely focus on the money, nurture the relationship. Better relationships lead to a better deal flow.
4. For you to be honest and have a pristine reputation
Having skills in sales, negotiation, and finance is worth nothing if you lack integrity.
You need to be transparent, do the right thing when no one is watching, and have my best interests at heart above and beyond your fiduciary duty.
5. Some Experience Working With Investors
Investors will likely avoid wasting energy and money with a realtor who isn’t an investor themselves or have some experience of working with investors at the very least.
Investors, usually, are in it for the money, and not for coaching and holding your hand while teaching you the fundamentals.
There is too much at stake for them to be distracted, and they are usually busy people.
This means that experience is key.
Here are some questions investors may ask you before they choose to partner with you:
Do you own any investment properties?
How long have you had them?
What types of properties: multifamily, commercial, single-family homes, etc.
Have you ever worked with investors on a deal?
Did the deal close? How do you think it went?
Approximately how many properties have you helped investors buy/sell?
What’s your niche? For example, REOs, fix, and flips, probate, etc.
Where do you help investors buy and sell properties?
What sets you apart from other real estate agents? Why you?
Is this your full-time job? (they are looking for someone who has time and energy to commit)
We understand how discouraging it can be reading this if you are new to the real estate space…
So, how can you get some experience if you are brand new?
Work With Beginner Investors
Every veteran investor statted as a rookie investor. This rule doesn’t just apply to you or to realtors. It is universal. So, you could try working with newbie investors who are buying their first investment property.
You may be surprised to find that many first-time investors know far less than you do. This positions you as an authority and someone to lean on for information and experience.
Be ready for hesitation, lack of serious funds, more effort to convince them on what is a good deal. Have patience, and treat them well. Your reputation is at stake.
Attend Local Real Estate Investing Networking Meetups & Seminars
Try networking, attend events, go to seminars, and take as many investing classes as your schedule allows.
The more you learn and the more people you meet, the more likely you will come across an investor who will give you that crucial first chance.
Shadow an Experienced Investor’s Agent (Find a Mentor)
Finding a mentor can shorten the learning curve significantly. Furthermore, it can open doors through connections that may otherwise have taken you years.
You can be a junior agent and learn the tricks of the trade from them. In return, give sweat equity; you can schedule their showings, put up signs and lockboxes, etc.
Get Your CCIM & Distressed Property Expert Designations
Completing both the CCIM (Certified Commercial Investment Member) and CDPE (Certified Distressed Property Expert); will give you a competitive edge with investors buying distressed properties to fix up.
Distressed Property Expert Designations will make you look more educated to investors and will be an investment in yourself. It will educate you and make you able to find your own deals.
Try Wholesaling & Offering Deals to Local Investors
Wholesaling real estate is a great way to get started buying and selling distressed properties with very little risk.
Once you find a property worth wholesaling, offer it to a local investor and see if you can get your foot in the door to working with them.
The Best Way To Leverage Real Estate Investors
After building one of the largest wholesaling businesses in the US, we feel like the best way to leverage investors is through wholesaling.
Click the link below, and we'll show you exactly how we do it right now, day in and day out!
