Table of Contents - #FreeFlowFriday: Raising Capital Myth Busting Part 1 with Dave Dubeau
Welcome to Free-Flow Friday, powered by the Property Profits Real Estate podcast, I am Dave Dibble and I'm very excited to give you an over the shoulder learning experience around raising capital, as well as other tips, tricks and strategies to help you on your real estate investing journey. So let's start let's discover together. Just find a good deal and the money will magically find you. This kind of makes sense if you got a really good deal and it's looking like you're going to be able to get your investor partners an amazing return on their money, why shouldn't you be just able to go out, tell people about this and they'll be beating down your door? All right. Well, my personal experience has been that is actually the worst time to be looking for money when you've got a really good deal on the go. Unless you've got something else in place first, but let me tell you a little brief story about my own experience around all of this, and I remember it vividly was 12 and 11, I believe it was. I had this really good rental deal on the go, perfect tenant buyers. Everything was lined up. I needed about eighty thousand dollars to close on the deal and get everything going. I had everything structured so I could see there was a really good return on investment for investor partners. And I thought, OK, great. Up until then I'd sell financed several deals, had them on the go, but I hit the wall trying to cash four more down payments. So I thought, OK, well, I've got this really good deal. So I should be able to just go and find some investors. But I hadn't lined anybody up ahead of time. So I starting from scratch. I was starting cold. So I tried all the old old stuff that you're supposed to try dialing for dollars cold calling did that flopped miserably. Got shot down in flames. I heard. Hey, turn every conversation into real estate conversations. I went out, networked up a storm, got shot down in flames. Again, I, I heard you know what you know, maybe it might be a good idea to email everybody I know about this particular deal and see what sticks. So that was the only thing I did that actually looked promising because I sent out an email to several hundred people with a little deal synopsis and saying, hey, are you interested? And I was kind of excited because I started getting some replies back until I started opening up those replies. And some of them were pretty nasty because these folks hadn't heard from me for a long time. And here I'm coming right out of the gate with, hey, it's Dave. I got a good deal. You got any cash? All right. That didn't go over very well. Very, very clumsy. Very stupid on my part. OK, so that's twenty, twenty hindsight. Bottom line, I had a great deal. I didn't have the money lined up first. I got an extension on it. Still can get raise the capital end up having to collapse. That deal lost out on that. Got massive egg on my face with the client. I was working with a realtor, I was working with the lawyers, the sellers, everybody. I just looked like a complete schmuck because, quite frankly, I was. All right. So here's my take on why that didn't work for several reasons. I did work. First reason is desperation. Right? Because when you got a deal on the go and you're kind of tired, it's a time crunch. You're going to come across as unless you're an amazing actor, you're going to come across as desperate and needy. Why? Because you are desperate and need you need that cash to close on the deal. So it's all about, you know, it's all about desperation and that kind of that kind of seeps out of your pores. Right. People can smell it. People's sense that and it actually repels them. It turns them off. Even if Chandler says needy is creepy. Right. So we don't want to be needy, don't want to be creepy. So that's why I think just find a good deal of the money will find you. Is the larky and what do you need to do instead is have your investor partners lined up ahead of time, have people that have already put up their hand and said, yeah, you know what date when you do find a deal, let me know about it. I'll be interested. I'd really like to see what it's all about. Ideally, you've got some folks already prequalified for financing so that when you've got a deal, you can go to them and bing, bang, bong off, you go to the races. That makes sense. So it's all about finding investors first. Then when you've got that good deal, you've got that short list of hot to trot prospective investors and you basically say, hey, who wants in first come, first serve, much, much better place to be in. You're not desperate, right? You're not needy. You're just saying, hey, I've got this opportunity that you're already interested in. Are you ready to pull the trigger? Absolutely makes a huge difference. All right. So now a little tip here for you. I would suggest, you know, if you're going to have a pool of potential investors ready to go in the wings, always have at least twice as much money as you think you're going to need spoken for. What do I mean by that? Well, chances are you're not going to be getting these investors to cough up one hundred grand or one hundred and fifty grand or seventy five grand or whatever it is, and have it sitting in a bank account waiting for your next deal. That's not usually how it works. Typically, what you're going to do is you can have a bunch of people say, yeah, you know what, Dave? Yeah. If you find a good deal, I could invest seventy five or one hundred thousand or whatever your your minimum is. Let me know about the deal when you read it. OK, so that, that's good. That's a good prospective investor, but it's not money in the bank yet. So for example, if you know that your average deal you're going to need to raise one hundred thousand dollars for I would say have at least two hundred thousand dollars in the wings, because by the time the smoke clears, by the time the rubber hits the road, by the time it's it's time to cut that check time and circumstances, life and circumstances sometimes get in the way. So folks might you know, life happens, a big expense might come up. They might not be able to invest right at that time or something else came up. And they've already invested that money in something else. So always have at least twice as much as you think you're going to need in the wings. And then you should be safe. Take your. Well, hey there, thanks for tuning into the property profits podcast, if you like this episode. That's great. Please go ahead and subscribe on iTunes. Give us a good review. That would be awesome. I appreciate that. And if you're looking to attract investors and raise capital for your deals, that may invite you to get a complimentary copy of my newest book right back there. There it is, the money partner formula. You got a PDF version at Investor Attraction book, dot com again, investor attraction book, dot com ticker.