Table of Contents - #FreeFlowFriday: Stranger Danger Investors 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 they think anybody with a pulse and hopefully with a checkbook could be a good prospective investor. No, no, no. Do not do that. Hey, there is game to go back at you, and today I've got another one of what I call my foundational principles of the money partner formula. So this is all about how to create a regular inbound flow of investor inquiries about your real estate deals without rejection. All right. And I think these principles are vital. If you want to be positioned properly in the eyes of your perspective investors and not come across as needy or creepy and not have to do that old school style of getting the word out with cold calling, networking, schmoozing, dialing for dollars. All of that stuff that just involves a lot of rejection. So today, what are we talking about? We're talking about the second foundational principle that call that stranger danger. What does that mean? Well, typically, especially if you've got any kids you're familiar with, that's a stranger danger is you don't want your kids talking to strangers, especially the ones that are offering them candy and all that kind of nasty stuff. And the same kind of thing applies to real estate investing. So one of the big mistakes that I see a lot of newbie capital raisers making is, you know, like a lot of us, they do the first two or three deals, one, two or three deals, and they sell finance those. Then they are out of cash and or or credit to do more deals. So they think, OK, I got to use other people's money. Makes sense. Right. We've all heard of that OPM, other people's money. But then they go around and they go out and they just try to spread the word to everybody and anybody. They think anybody with a pulse and hopefully with a checkbook could be a good prospective investor. No, no, no. Do not do that. I see it over and over again. I see people advertising kids see people doing dumb stuff on the local newspapers, looking for capital, looking for investor partners. So, first of all, several reasons why I suggest you don't go after strangers. And the first reason is because they're really, really hard to crack the code raising capital from strangers in the first place. Sure, there's lots of them. There's almost a billion people on the planet. There's a lot more strangers than there are people that, you know. However, I mean, just think about it objectively. If you're looking to raise capital for a real estate deal, chances are you probably need around a hundred thousand dollars for the down payment for the property that you want to buy or rentals or whatever it is. You need a fair chunk of change. If you're going out to the general public, they don't know you from right. They don't know you at all. So there's going to be a lot of natural suspicion about this guy or this gal that's trying to raise fifty seventy five one hundred thousand dollars from them for their real estate deal. Just makes sense. They don't know. You don't have that relationship going. You're starting from scratch. Right. So in order for people to invest, really, and they need to know you, like you and trust you, a stranger does not know you, probably doesn't like you and definitely doesn't trust you with their money. So it's a lot of hitting your head against a wall. It hurts a lot. You're going to be just up for a massive amount of rejection if you're doing it that way. It's kind of a kind of it's definitely a numbers game and you just have to do a massive volume of stuff, cold calling, networking, shmoozing, whatever it is to get one or two investors. And just the amount of rejection involved is overwhelming for most people. OK, and here's the big one. Typically, if you are raising capital for a real estate project and you're dealing with a stranger, somebody that you don't have a relationship with, you are crossing the line with the Securities Commission. All right. So, again, I'm not a lawyer. I'm not an accountant. I'm not a security specialist. I'm just expressing my understanding of it. But they're pretty clear about this, that you are not supposed to be raising money from Joe Public unless you are licensed to do so. So does that mean, like financial planners are licensed and they work for big banks, they work for big mutual fund companies, they work for brokerages, that sort of thing. Mortgage brokers are licensed, stock brokers are licensed. But again, most of these folks work under a much larger entity. All right. So the Securities Commission is trying to protect Joe Public from con artists. And I think they're also kind of trying to help protect big business and big banks from more competition. But that's a different, different story. But bottom line is, you can get yourself into a world of trouble if you're raising capital, if you're raising money, without the appropriate documentation, without the appropriate licensing. The other choices, you can get an offering memorandum for your deal. But last time I looked into that, that cost tens and tens of thousands of dollars, lots of legal stuff to do, hoops to jump through that sort of thing. All right. So stranger danger when it comes to raising capital. Do not try to raise capital from the general public unless you're licensed to do so, which is quite difficult. They tend to have to be working for the big guys in order to do that. Or you do an offering memorandum, which again, doesn't make sense for most mom and pop real estate entrepreneurs. They're not at that stage yet. All right. Take care. Talk to you next. 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 get a PDF version at investor attraction book, dot com again, investor attraction book, dot com ticker.