There are two kinds of people in the world: Those who say they are going to do something and those who actually do it. You might find people who are interested in becoming investors but once the proverbial rubber meets the road, they may be hesitant to part with their money. Or, they might hand over their investment with several demands and strong arm negotiation tactics.
As a real estate entrepreneur, you need to not only find potential investors and convince them of your ability to generate a return on their investment, you need to be able to qualify them. Are they going to trust you or stand over you while you work? Are they going to work with you for a mutually profitable relationship or will they leave you in the dust? Here are four questions you need to ask all of your investors.
Question 1: The Reason. Ask your investors, "Why do you want to invest?" They will never want to invest for the sake of investing. Instead, they will want to be able to pay their grandkids' way through college or they will want to retire from their job in ten years.
When you know why they want to invest, you'll be able to structure the deal in a way that is attractive to them. Someone who wants to pay for their grandkid's way through college in 2 years will have a different weighting of cash, equity, and risk than someone who wants to pay for their newborn grandkid's college in 18 years from now. Someone who wants to retire from their job in ten years might want to put in some cash and receive equity that they will grow over time that they can cash out later. Knowing what motivates them will help you.
Question 2: The payback. Ask your investors, "How do you want your money returned to you?" They might want monthly, they might want a lump sum, they might want equity, they might want all now, they might want some now and some later. It all depends.
Knowing the answer to this question, and the answer to the first question, are going to improve how you structure your deals. If you find that your investors have been resisting multifamily apartment investing with you, start asking these questions. You will create goodwill by paying attention to them. And you will gain insight into what is important to them so you can present the multifamily apartment investment opportunity in a way that meets their needs.
Question 3: Experience. Ask your investors, "Have you had any experience in real estate investing before?" and, "What was your return on those occasions?" This will help you to know what their expectations are going into the deal. As well, it hints at how enthusiastic or reluctant they will be at your opportunity.
Other questions you'll want to ask them related to investing experience are: "What was your overall experience?" "Were you a lender or equity provider?" And, "What is your desired return on investments and what are you currently earning?"
Question 4: Money. Ask your investors, "How much are you looking to invest?" This straightforward question is a good question to ask because it helps to qualify your investors, separating the "sayers" from the "doers". And you'll want to know the source of that money because liquidity is important to you since you don't want to wait for them to go through the long process of cashing out illiquid investments.
The first time you invest with someone, they might not want to give you all of their potential investment capital, so they will test you with a small amount. So follow up the above question with another. If they give you $50,000 then ask them "if I have an opportunity for $250,000, should I call you about it?" If they answer with a yes, you know they are testing you; if they answer with a no then they've reached their investing limit.
These four questions, and the related questions that go with them, will help you to create great working relationships with your investors.
As a real estate entrepreneur, you need to not only find potential investors and convince them of your ability to generate a return on their investment, you need to be able to qualify them. Are they going to trust you or stand over you while you work? Are they going to work with you for a mutually profitable relationship or will they leave you in the dust? Here are four questions you need to ask all of your investors.
Question 1: The Reason. Ask your investors, "Why do you want to invest?" They will never want to invest for the sake of investing. Instead, they will want to be able to pay their grandkids' way through college or they will want to retire from their job in ten years.
When you know why they want to invest, you'll be able to structure the deal in a way that is attractive to them. Someone who wants to pay for their grandkid's way through college in 2 years will have a different weighting of cash, equity, and risk than someone who wants to pay for their newborn grandkid's college in 18 years from now. Someone who wants to retire from their job in ten years might want to put in some cash and receive equity that they will grow over time that they can cash out later. Knowing what motivates them will help you.
Question 2: The payback. Ask your investors, "How do you want your money returned to you?" They might want monthly, they might want a lump sum, they might want equity, they might want all now, they might want some now and some later. It all depends.
Knowing the answer to this question, and the answer to the first question, are going to improve how you structure your deals. If you find that your investors have been resisting multifamily apartment investing with you, start asking these questions. You will create goodwill by paying attention to them. And you will gain insight into what is important to them so you can present the multifamily apartment investment opportunity in a way that meets their needs.
Question 3: Experience. Ask your investors, "Have you had any experience in real estate investing before?" and, "What was your return on those occasions?" This will help you to know what their expectations are going into the deal. As well, it hints at how enthusiastic or reluctant they will be at your opportunity.
Other questions you'll want to ask them related to investing experience are: "What was your overall experience?" "Were you a lender or equity provider?" And, "What is your desired return on investments and what are you currently earning?"
Question 4: Money. Ask your investors, "How much are you looking to invest?" This straightforward question is a good question to ask because it helps to qualify your investors, separating the "sayers" from the "doers". And you'll want to know the source of that money because liquidity is important to you since you don't want to wait for them to go through the long process of cashing out illiquid investments.
The first time you invest with someone, they might not want to give you all of their potential investment capital, so they will test you with a small amount. So follow up the above question with another. If they give you $50,000 then ask them "if I have an opportunity for $250,000, should I call you about it?" If they answer with a yes, you know they are testing you; if they answer with a no then they've reached their investing limit.
These four questions, and the related questions that go with them, will help you to create great working relationships with your investors.