Tips for Raising Capital for Real Estate Investments

Tips for Raising Capital for Real Estate Investments

Real estate is one of the most prized possessions globally, and the United States has some of the most valuable real estate in the entire world. One of the many things that makes property such a popular asset is that it has unlimited potential. How much you can make off the property is dictated by its location and the potential that others see in it. The legend that Walt Disney paid $80 for an acre of land in Florida which eventually turned out to be the first piece of land in what was to become Disney World is an inspiration for many wide-eyed real estate investors.

Walt was able to get the land for such a low cost because no one knew who the buyer was or his intentions for the land. No one saw the potential of their property until they learned who the buyer was, which lead to Disney having to pay $80,000 for the last acre he bought in that area. The point is that the last person to sell their land saw the same potential in it as Disney and asked for a much more appropriate amount. But, being a great real estate investor is about more than knowing how to spot properties with potential. It’s also necessary for you to have a knack for raising capital for your real estate investments. Continue reading to learn some tips that’ll help you raise capital for your next big real estate investment.

Use your inheritance as collateral.

Even if you intend to get the most of the capital for your investments from lenders and other investors, you still have to put up some seed money of your own. Some investors have used inheritance loans to get the money they need to make their initial investment in a property.

Don’t feel bad if you’re wondering, “What are inheritance loans?” In truth, it’s not a loan at all—it’s a way of getting a portion of your inheritance in advance. Because it’s not like a traditional loan, you don’t have to go through a credit check or verify your employment status. If you’re an heir to an estate, you can use your inheritance as collateral, and the estate repays the lender directly. And of course, with the estate repaying the loan, that means you can sleep well knowing you haven’t added another monthly payment to your financial load.

Put together a thorough and realistic proposal for potential investors.

One of the most important skills that all of the best real estate moguls have in common is that they’ve been blessed with the ability to see potential in a property and then get others to see it as well. In other words, they know how to purchase and develop properties using as little of their own capital as possible. You’re going to have to borrow money at some point, but you should know that the best real estate investors are big-time borrowers as well.

The key to getting people to fund large investments is putting together proposals that help them see the potential for profits you see in a particular property. For instance, if you were planning on building a luxury rental property on a prime piece of real estate in New York City, then your potential investors need to see tangible evidence of your vision for the future.

You, yourself, are the most important part of your presentation, and you’re on display everywhere you go, so you’d better be sharp. Typical work clothes for women in real estate are the blouses, heels, and blazers you’d see on runways in New York and Paris. You must project an image of not only professionalism but success as well.

Of course, your character is more important than your clothes. Taking on a cause to improve others’ lives by donating and raising funds is a great way to be the change you want to see in the world and build a reputation for being a contributing world citizen. John Arnold is a great example of someone whose philanthropy has helped him gain favor with lenders and investors. It’s true that when you give, you also receive.

It’s natural to want to be creative when developing a proposal for lenders and investors, but it’s important to remember that you’re putting on a presentation, not a Disney special. You don’t want to go so heavy with 3D physical models and virtual reality models that people get lost in the effects and miss the most important part of your presentation, which is the potential of your real estate investment.

While you want to get potential investors excited about the project and about you as a borrower, it’s critical that you temper expectations by being as realistic as possible with your future projections. Don’t let the confident optimist in you cause you to make messianic promises that you can’t keep. Many real estate investors try to rope in private money lenders by promising large returns, but honesty with yourself and your potential lenders and investors is the best policy.

You’re going to have to go money mining.

As robust as the United States’ economy is, it shouldn’t be too hard to find the money for your real estate project. However, if you want to get to the money necessary for potential properties, you can’t just look for it—you have to go money mining.

Many newbie real estate investors rely on traditional loans or use their home equity to purchase their first investment property. There’s nothing wrong with either of those two options, but you should know that those aren’t your only two options.

One of the best ways to get the capital you need for a real estate investment is through a private loan. A private loan is simply a loan given to you by a private citizen or group of private citizens. This could be a friend, a business, or even a private lending group like a hedge fund.

If you go online and search for “private money lenders near me,” you’re going to get a ton of results, but how will you know which is the best one for you? Finding the right lender or investors is like finding the right business partners because, in essence, that’s what you’re looking for.

Sometimes, real estate projects need further development to maximize their potential, which, of course, means more money. Real estate brokers running out of money is among the main causes of major projects coming to a halt. Having backers that truly believe in you and the project means you have partners who will be more willing to open their wallets when properties require additional funding.

If you have valuable possessions, get a hard money loan.

Hard money loans are another way to raise capital for an investment property. A hard money loan is when you use a valuable possession, whether it be precious jewelry, a home, or some other valuable possession, as collateral.

It may be hard to put up a valuable possession as collateral, but if it doesn’t hold significant sentimental value to you, then it’s a great way to get the money you need quickly. If the item is sentimental, then that’s all the more impetus to make sure that you turn your investment property into a success.

The most important thing to remember when trying to raise money for an investment property is that you aren’t out of options until you’ve exhausted every possible avenue. There is around $2 trillion circulating in the United States economy right now, so the money’s there—if you’re patient, well-prepared, and persistent, then you’ll get the funding you’re looking for.