One of the biggest complaints I hear from real estate investors is “Where do I find the money for my down payment?” Although this can be challenging for most newbies, I find that it is more difficult to locate deals that offer great returns and create wealth for the investor. There are a couple of avenues that investors can take to unearth that elusive down payment.
On our very first deal, we formed a partnership to pool our funds to acquire the property. We were also fortunate to secure owner financing as part of our down payment. The bank was willing to accept 10% of the down payment as seller financing and 10% of the funds came from the partnership.
We finally closed on our first deal, but that brought about our next problem. Where were we going to find the money for our next deal? We all liked the idea of a partnership, but unfortunately, this partnership was low on funds. We had to come up with another strategy.
We decided to create a Credibility Book to allow us to recruit another partner. The Credibility Book outlines our investment strategy, details our portfolio holdings, describes the market we invest in and highlights our investments. A potential partner can see what type of returns he can expect, what niche of real estate you invest in and how you will create value with the investment.
For example, our Credibility Book highlights the fact that we invest in the Knoxville, TN market because of the favorable tax laws as well as the plethora of jobs and the expansion of the market. We buy underperforming small to midsized “mom & pop” multifamily properties that have demonstrated strong cash flow but are being held back by poor property management and deferred maintenance. We target B and C properties from 20 to 150 units. We focus on this quantity of units because 20 units is too large for most small investors and 150 units is too small for institutional investors, thus allowing for less competition.
Our Credibility Book also lists our portfolio of properties and details how we repositioned these properties to create value and generate positive returns. We detail the problems with the properties when they were purchased and the solutions implemented after acquisition. Our goal is to convey to the investor our success and our focus on a specific niche. The investor wants to know how you are going to make him money and how he is going to get his money back. It is our job to describe to him in detail the opportunity that we are presenting to him.
Credibility Books can also be utilized to secure bank financing, especially if you are trying to establish a relationship with a new banker. On our third deal, we were introduced to a community bank in our market. We presented the banker our Credibility Book, and he was able to understand our business plan and our strategy to add value to the asset. We recently recorded a podcast with Mike Saporito, the banker who made it possible for us to acquire this 136 multifamily property. Click here to listen.
I credit our portfolio growing from 0 Units to over 500 in only three years to our Credibility Book and our ability to focus in on a niche. It is very difficult to hit a target that you can’t identify, and we identified our target early on in our career and maintained our focus and attention on that target. Click Here to get a copy of our Credibility Book.
We have developed a program on Udemy that helps you build your own personal Credibility Book. We want to make it easier for you to go out there and raise all the funds you need to close your deals. Click here to access the program, and we’ve included a 50% discount for being part of our community. Coupon Code: JG-StudentPass-12
We are offering a complimentary thirty-minute coaching call to help you build your own personal pitch book. As with all of our products, if you are not totally satisfied with the course, we will refund your money within thirty days, no questions asked.
So what are you waiting for? Let’s start raising some money!