Table of Contents - #FreeFlowFriday: Raising Money When Your People are BROKE with Dave Dubeau
Welcome to Free-Flow Friday, powered by the Property Profits Real Estate podcast, I am Dave Debeau 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 what to do when everyone you know is broke or won't invest with you. This is one of the big issues that I see with a lot of people when they want to start raising capital. Finding investor partners is they get really stuck around this whole idea of either, hey, you know what? Nobody I know has any money or the ones that do have money probably wouldn't invest with me. Right. And why this is such a big problem is because over 80 percent of, quote unquote, active real estate investors, in other words, people that actually have revenue properties in their portfolios, over 80 percent of them get stuck with one or two or maybe three deals in their portfolios. And then they run out of cash, they run out of credit to buy more property and they get stuck. Right now they get stuck because they've got a mistaken belief that everyone that they know is broke or people who they know aren't going to want to invest with that. Right. And bottom line is, we didn't get into real estate investing probably to have one or two little deals in our portfolio. That's nice, but it's probably not going to make that kind of difference in your life and your lifestyle that you're looking for and what you had in mind when you first got into real estate investing in the first place. So, again, the big challenge I see is people have this belief that, you know, I'm not worthy. Right. Or everybody I know is broke and or they have other limiting beliefs, something along the lines of what nobody's going to invest with me because everybody thinks real estate investing is just too risky or. You know what, Dave? I think I've kind of shot myself in the foot because I tried a different opportunity a few years ago of the network variety and it didn't quite work out. And I've made a big kerfuffle about it. Got the word out, talked to a lot of people. I didn't make any money. They didn't make any money either. So I got a little bit of egg on my face, so to speak. I don't think anybody's anybody's going to want to take a second crack at anything with me or. You know what, Dave? I just don't feel like I've got enough experience. I've got one, maybe two deals under my belt. But in order to raise capital, I think you really need to have a lot of deals, maybe a dozen deals under my belt before I can start raising capital. Or, you know, here's a big one. It's kind of a combination. You there's the thing I don't want to mix business and pleasure. I don't want to mix business with friendship or with family. I don't want to mix those two up. All right. Or Dave, I grew up in a family where we learned that we believe that neither a borrower nor a lender be. I know where that came from, but it might be a biblical thing. I'm not sure about that or a big one, Dave. I really don't want to approach my friends and my family and people that I know because I'm worried about getting the door slammed in my face. I'm worried about rejection and nobody likes rejection. And you know what? All of these are legitimate concerns, right? Because, I mean, think about it. What if you did stretch out of your comfort zone and you approach people that you know about investing with you? And what if you lost a really good friendship because the other person felt like you are pitching them or you were pressuring them to invest with you? That's a concern, right? What if you got the door slammed in your face, either literally or figuratively, because people had gotten involved in your last opportunity and it didn't quite work out? Right. Or what if somebody does ask you how much experience you have and you have to bashfully admit that you've only got one deal or two deals under your belt? Right. Or here's probably the worst one. What if you did get somebody to invest with? You have a close friend or family member and heaven forbid the deal goes poorly. How uncomfortable would that be right now? How would Christmas dinner be around the family dinner table if your deal went south and you lost somebody, some somebody that would be pretty stressful right now. All of that is true. However, there are some serious costs involved to not dialing in this whole raising capital thing. There are some serious costs involved with it. So, for example, the biggest cost is if you don't figure this out, you're going to stay stuck. Right. And chances are you going to do real estate investing to create a better life for you and your family. You wanted to create some serious cash flow, some serious net worth. And one or two deals is good, but a lot more deals is a lot better. Right. So if you don't get this figured out, you're going to stay stuck. All right. And it's going to severely limit your income, your net worth and that dream lifestyle that you're going to do real estate investing for in the first place. That's what got you started. It was if you don't get this down, then you're going to have to. Keep punching a clock at a job that you might not like, you're going to have to keep making do with a lifestyle and a life that you don't particularly like, you're going to have to settle for financial mediocracy for yourself and your family. You know that you're not going to be the example that you want to be for your for your kids and your spouse. You'll probably be frustrated with the idea of having to cut back big time for retirement or having to continue to work well into your golden years. You're going to be worried that, you know, bottom line on your deathbed, you're going to look back on your life and say, why didn't I really go for it and play all out? I know I could have done better. Those are all big words. All right. So let's go through each one of those big concerns one by one and hopefully not. Hopefully, I will dismantle each one of them. All right. So let's start with the first one. So the first big thing is, Dave, everybody I know is broke. Nobody could invest with me, even they wanted to because nobody's got I don't know anybody with any money. OK, so first of all, I doubt this very much if you read. I mean, that might be true within a few of your close friends and your close circle. But if you took a look through all the people that you have a preexisting relationship with, other all the people who you know and who know you, first of all, there's probably a lot more of them than you'd think off the top of your head. And second of all, some of them do have money. It's been my experience, and this is after working with dozens and dozens of clients and raising millions and millions of dollars with them. Is that quite often the people that you think who don't have any cash actually do and the people that you think have the cash are all flash? Right. Or like they say in Texas, they're all hat and no cattle. Right. And, you know, these kind of folks are so busy trying to keep up with the Joneses, they're stretched to the limit financially. A of them are basically one paycheck away from financial disaster, perhaps even bankruptcy. And then if you're familiar with that old book, The Millionaire next door from years back, that did a very interesting study that the vast majority of millionaires in North America are everyday people. They live in houses just like you and I. They live in our neighborhoods. They're not living in the big wealthy house on the top of the hill. They're not driving super luxury fancy cars. They're everyday people that are very, very good with their money. So never judge who you think has money and who doesn't. All right. It is very, very important. Reminds me of a story from years ago. I used to live in in Costa Rica and I had a business partner. Oscar and Oscar had been involved with a different company, was a sales guy for this company, and they were selling kind of a higher end product. I don't remember what it was, some sort of a service. And I remember telling me one day this very humble little older couple came into the office for a presentation and Oscar took one look at these guys and said there's no way that they've got any money. But luckily, Oscar is a pretty nice guy. So he he did the whole presentation anyhow. He gave it is all he really was very, very nice with these people. And at the end of the whole presentation, the little old lady or the wife turned around and said, you know what, I like this young man. Let's let's buy the program or the product or whatever. And they ended up buying basically three times more than anybody else ever had. And first of all, I was thinking, mother sounds nice, but there's no way they can back that up. But they could. It turned out they're very, very, very wealthy ranchers from a rural area. And they didn't give a crap about looking the part of being wealthy. Right. And that's quite often the case with wealthy people. They don't need to show off. Right. So never assume who has money and who doesn't have money. So the lesson there is one solution here is get the word out about what you're up to, to everyone that you know, and let them sort themselves out. Right. I mean, basically, if you're doing stuff via email and that sort of thing, they can opt out. They can unsubscribe if they don't like what you're doing or if they're not able to participate, they can self select. Right. So don't do it for them. Don't assume. Who has money and who doesn't have money, you know, what I assume stands for, right, making an ass out of you and me and trust me, I've done my fair share of assuming over the years. All right. So, OK, let's go out to number two. And that is people won't invest with me because they think real estate investing is too risky. Now, this is a common concern and legitimately so because, again, the news and the media, all they ever do is harp on the negative harp on how bad things are not just with real estate, but with life in general. Right. That's bad news is what sells, not good news. And you know what? There was a pretty hefty downturn in the States in the 07, 08, 09. Time frame, and it lasted for quite a long time and there have been ups and downs in the Canadian market, that's for sure, that's normal. That's called the real well, what happened to states wasn't normal, but that's the real estate cycle. And even what happened in the states, it really was five, as far as I recall, it was five markets that were heavily impacted and the rest of the country fared pretty well. They did not. It was just five main markets that really tanked in that whole debacle. Right. The problem is Joe Public doesn't understand this and Joe Public watches the news, listens to news and gets their news from social media, et cetera. So they don't really know what's going on with real estate investing. And the solution to this challenge is education. It really is. It's all about showing people why real estate is actually a solid investment by real estate investing. Done the right way is a fantastic way for everyday folks to get a very good return on their money, backed by something tangible, something real. And that's a real piece of property, because at the end of the day, everybody and every business needs a roof over their heads. I shouldn't say every business. There's a lot of online businesses, but you know what I mean. Every serious company, every every person needs shelter, and there's always going to be a demand for that. So that's something solid, something tangible. Plus, real estate investing, depending on what you do and how you count them, has multiple different profit centers anywhere up to eight profit centers that I'm aware of with a real estate deal. Compare that to a stock, a bond, a mutual fund, putting money in the bank, getting a jessey, anything like that. And it's quite easy to show people or educate people, especially over time, that real estate investing really is a solid investment. Mehak You just point to the fact that the banks are willing to finance up to ninety five percent of the value of a property and they definitely won't do that for pretty much any other kind of investment. Right. So it's always about that. And what I like to do is compare and contrast real estate versus other investment classes. All right. And when you do a good job of this and you're relaxed and you do it in a no pressure kind of way, folks start to come around. Some are going to be ready to go sooner rather than others. Others, it might take a little bit longer. You have to educate them about what you up to. OK, point number three. Well, Dave, I'm worried about talking to my friends and family about investing with me because I tried one of those MLM type opportunities a few years ago. It didn't work out. I didn't make my millions. I signed a few other people up. They didn't make their millions. And we all kind of fizzled out, dropped out. But I had I had kind of shake the tree and made a big splash at the beginning and not much came out of it. So I'm worried that I've killed my credibility with my sphere of influence with people that I already know. OK, well, that's your case. Welcome to the crowd. I join the crowd. I mean, so many of us have been through that that situation. It is not uncommon. In fact, it's very, very common. And it just actually makes sense. I mean, think about it. If you are really into real estate investing, if you really want to create and improve life and lifestyle for yourself and your family, you want to create passive income. You want to create wealth and net worth. You want to create a better life and lifestyle. Do what you want, when you want, where you want. Well, that's quite entrepreneurial, right? And it's just kind of that's what's a track. Those are the kind of people that are attracted to network marketing opportunities. Those are the kind of people that are attracted to business opportunities. Those are the kind of people that are attracted to real estate investing. It just makes sense. You're entrepreneurial, so don't kick yourself too hard for giving it a try and definitely don't take yourself too hard for not making it, because that is the reality for the vast majority of people. In fact, Mr. read this because I just pulled this stat before this call here, and I found out that there was a study done by the AARP, American Association of Retired Professionals, I think is what it is, that Stanford, which showed that a full seventy three percent of people who participated in network marketing either lose money. Or make no money and the majority of them actually lose money. OK, so that's seventy three percent, almost three quarters of everybody who gets into an MLM or network marketing opportunity loses money or at best breaks even. It goes flat now. So you might want to say why. Twenty five percent are making money. Well, not really, because out of the twenty five percent who make some money, over half of them make less than five thousand dollars, not five thousand dollars per year. Five thousand dollars total. Now, if you were ever involved in network marketing in a serious way, you know, you probably spend a heck of a lot of time, energy and money trying to make the business run, make the business successful. And if you ended up losing money or breaking even or making five grand, even if you made five grand, that probably didn't even come close to minimum wage for the effort involved. All right. So very, very few people make it in any serious way with network marketing. The success rate among real estate entrepreneurs is much, much higher. So over twenty five million people across North America have given network marketing a try. The vast majority have flopped. So if you flopped, you're in very, very good company, OK? And actually, I think this is a good thing. So if you've taken a crack at network marketing and you flopped at it, that's actually a good thing, in my opinion. Turn lemons into lemonade from raising capital point of view. Why? Because when you own up to it, when you don't try to shy away from it, when you don't try to minimize it, you just say, yeah, you know what? I gave it a good shot. It didn't work. But here's what I found that is working. And this is real estate. And this is why it works so much better than that. And then you go into and you compare and contrast real estate investing to network marketing. And there are in my mind, there are just a ton of huge advantages to real estate over network marketing. First of all, you own your real estate. You're not working for a network marketing company. They can't change your compensation plan. They can't do all this kind of change your product line, do all this kind of stuff without any control. So, yeah, you own it. You control it. You've got multiple profit centers from this, et cetera, et cetera. So it's very easy, especially if you've got a couple of deals on your belt that are making money for you to show people who you might have shown your network marketing opportunity before, show them this new opportunity in this new light. It's just going to make that much more sense for them. All right. So don't let failure, past failure in other businesses or network marketing opportunities stop you from going forward with your real estate investing. Next big one is, hey, Dave, I've only got a couple of deals under my belt. I don't think I'm worthy to talk to people about investing with me. And that is that's a very common one for a lot of people. Now, hopefully this will help you break out of that hurdle, that obstacle. My friend Peter Kench was the top mortgage professional in the country for many, many years, more mortgage professional who focused on working with real estate entrepreneurs, real estate investors, not mom and pop house. That's right. And I can't remember who is talking, whether he was talking with one of the big guys, the head honchos, I think was from Genworth or one of those, you know, mortgage insurance companies. And the guy told them that they had studied this and less than five percent of people who did their mortgages had ever purchased revenue properties. So in other words, out of one hundred property buyers, only five percent were involved in revenue properties. The other ninety five percent were buying their principal residences. So what does that translate to? That means that ninety five percent of the regular people who you know, I'm not counting the folks from the real estate investment clubs. Ninety five percent of the regular people that you know or the civilians, as I call them, have never purchased a single revenue property in their lives. So even if you just have one deal under your belt, you are light years ahead of the person who hasn't done a deal. That makes sense. So even if you only got one or two deals, the vast majority of people have never done a single revenue property deal. Now, this is kind of like if you remember way, way back in my case now, I got a lot of gray hair. It's way, way back to when you were in kindergarten. If you remember back in June, you're in kindergarten. You're just starting. It's your first experience with school. You don't know how to read. You don't know how to write, don't know how to print. You don't know how to do math. You don't know anything. And then remember looking up to a kid in grade to write two years old in grade two. And now there's this kid who knows how to print, who knows how to read and knows how to add and subtract. Do all this cool stuff that you don't have the faintest clue about that kid seems like God to you, right, because they're a little bit ahead of you. That's the same idea with real estate investing. If you got a deal or two under your belt, you are exponentially ahead of somebody who hasn't ever done a deal before. All right. So that's the idea. Don't wait until you've got a dozen deals on your belt. Get going now showing your opportunities to people because the vast majority of them will not have ever done a deal themselves any day now. The next big one is Dave. I don't want to mix business and pleasure. I don't want to mix real estate investing with my personal and my family relationships. And it's kind of combined with you know, I grew up with a saying neither a borrower nor a lender be. And I combine these two because they're quite closely linked. And if this is done poorly, it can be a bit of a disaster. Right. So you've got to be very, very, very strategic about this. But when you set things up properly from the get go right from the very beginning and you treat your investors, you especially their family member or friend, if you treat them as a client and not as a buddy, not as a brother, not as a cousin, not as a parent, as a client, somebody that you're looking out for, somebody whose money you are going to protect and you're going to respect when you set things up properly in the first place. It can lead to fantastic success. Right. So it's all about doing things properly, making sure that you've got contracts and not just doing it on a handshake, making sure that you've got regular reporting on a very consistent basis, at least every quarter. Every six months. Right. Very important. So neither a borrower nor a lender be. And you're worried about working with friends and family because you don't want to mix business with pleasure. So, again, it's all about setting things up properly in the first place. Realistic expectations under promising and over delivering, showing people the pros and the cons of your deals, making sure they're very aware of what some of the pitfalls might be, making sure you've got excellent communication and reporting during the deal, especially if things start going a little bit awry, not trying to run away from it, facing it head on and letting people know, letting people know ahead of time. Right. So when you do things that way, it works extremely well right now as far as the whole, you know, neither a lender nor a borrower or B, this is a big. This is this gets in the way of a lot of people. And that's because we're kind of looking at this as if it's all one sided, as if it's all in a benefit to me and not to the other person. But here's the truth of the matter. When you are working with investor partners and allowing them to get involved in your real estate deal, you are doing them a huge favor. Of course, they're doing you a favor. They're providing you with the funding to get into your next property and grow your portfolio, your net worth, your cash flow, all that good stuff. But you're doing the same thing for them. I mean, think about it. You're helping them to accomplish something they either cannot or will not do on their own. This is very, very big. And you're sharing the profits in the deal. All they have to do is come up with the money and perhaps help qualify for the financing and then their job is done. You're left doing all of the work. You're left. You're the one that's responsible, and you are cutting them a check, making them a payment on a regular basis. You're helping them to grow their net worth. You're helping them to create a better life for themselves and their families. It's not a one way street. The benefits go both ways. Right. So it's very, very important that you understand. So, for example, one of my students and clients, John Simko, he's got a great story about working with an investor client. And because of the investments that these folks were doing with John, they were actually able to retire years earlier than they could on their own. The cash flow they were getting from John's deals allow them to take early retirement. How cool would that be? Now, that's a pretty extreme example, but let's say you helped an investor partner create some extra cash flow and be able to take a vacation that they would be able to take otherwise, or you help that person to put their kid through university. Where would have been a struggle otherwise? Or you help them cover some of their other debts and pay off some of their other debts thanks to the investment they did with you or you helped them to get into a do some Renaults on their house and get a nicer living arrangements or buy another a nicer property or a nicer vehicle, you help them improve their lives. This is something they wouldn't be able to do on their own or they're not willing to take the time and the effort to learn what you know, to be able to do that on their own. So, again, very, very important that we always keep that in mind. OK, now the next thing is and the last one, this really is kind of the crux of the matter for a lot of people is Dave, I'm really worried about what other people are going to think or say about me. Right. I don't like the idea of reaching out to my friends and my family because I don't like the idea of rejection. I don't like the idea of them gossiping about me behind my back. I don't want that to happen. You know, not fair enough. Nobody likes rejection. Nobody likes people thinking ill of them. But here's the reality, folks. Here's the reality. If you want to get extraordinary results, which is what most of us want to get when we're getting involved with real estate investing, you're going to have to do things that are out of the ordinary. You're going to have to do extraordinary things. You cannot expect to get ahead financially to get ahead through real estate investing by sitting on your ass watching TV and vegging out on Netflix and just hoping for something better to happen. It doesn't work that way. You already know that, right? You also know that in order to grow your portfolio, you're going to have to use other people's money. Right? The choices were that are people that you already know that you have that preexisting relationship with. That's what we're talking about right now, or trying to go out to strangers. Now, hopefully by now you understand that going out to strangers can be very, very dangerous because of your not so friend, the FTC or Securities Commission. Right. You can be crossing a line there and getting into big trouble. So you need to avoid doing that. Plus, I mean, think about it. In order for somebody to invest with you, they need to know you like you can trust a stranger doesn't have anything. They don't know you. They don't like you. And they sure as hell don't trust you with their money. So it's very, very difficult to raise capital from strangers. So let's focus on the people that we already know. Now, getting back to that whole thing. Well, I'm afraid of rejection. I'm worried about what other people are going to say or what they're going to think about me, I think was Aristotle who said there's only one way to avoid criticism. That is do nothing, say nothing and be nothing. That's pretty harsh, but it's very true. Think about it. You just sit there like a lump. That's the only way that you can avoid criticism. There's another saying that the farther up you climb on the totem pole, the further out your ass sticks and the more people are going to be taking shots at it. That's true, too. I found that over the years. But here's the reality. OK, eventually you're probably going to piss somebody off. It's hard to avoid that. We're all human and especially. Nowadays, everybody's so damn sensitive about everything, sooner or later, we're probably going to piss somebody off sooner or later, probably going to get rejected by somebody. That's life, people. That is life. Suck it up, buttercup. Develop a little bit thicker skin. And you know what? Who cares? Because whoever that person is that criticizes you or rejects you or gets ticked off at you, chances are they never would have invested with you anyhow. So what difference does what what value are they bringing to your life? Now, here's the other thing. If you do things properly, you don't have to go through very much of that. I can't guarantee that you won't go through any of it, but you can avoid the vast majority of it. If you do it right. You can avoid pissing people off. You can avoid rejection, and in fact, you can get them reaching out to you. Interest in your deals, reaching out to you, asking for more information, reaching out to you, emailing, texting, calling you, wanting to find out more about what you're up to with real estate. And once you got people doing that, it's such a pleasant conversation, so much easier. Right. And when you're working with people that you already know, you've got two out of the three things taking care of that you need. These people already know you. They're already like you. Now, we really just have to work on that trust factor to get them to trust you with their money. All right. And that is so much easier to do when you get everything set up properly in the first place. OK, so always keep that in mind. We have a good idea what's in it for us, but also really keep top of mind what's in it for the other person. If you get a friend or a family member to invest with you in a good real estate deal and you're sharing the profits with them 50 50, remember what the benefit is for them, right? They're getting as much benefit out of this deal as you are, if not more, because you're putting all the effort into it. Does that make sense? Take care. God bless. 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. It is the money partner formula. You can get a PDF version at investor attraction book, dot com again, investor attraction book, dot com ticker.