Why You Should Consider Raising Money from Private Individuals for Apartment Building Investing

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Published: 20th November 2016
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I was talking with Frank who was a newbie investor in multi-unit properties. He explained he would seriously start looking for deals (i.e. making offers) once he had enough money to invest. But he couldn't really tell me when that was going to be. He said he couldn't see himself writing a contract on a building right this moment because he didn't have enough money to close. Who would take him seriously? I suggested another viewpoint. What if he raised money from private individuals? He was not positive how that could help. And besides, his friends and family didn't have any money anyway.

I hear these arguments to getting started with apartment building investing regularly. Many people don't have the funds, and for that reason they are trapped.

I want to take these types of arguments entirely from the table.

In reality, you don't need to have a ton of your own capital or a good credit score to get started with apartment building investments. The trick to get you started now is to raise money from private individuals.

Here is why:

  • You will not need your own money. I hate stating the obvious, but since the lack of money is the biggest objection to getting started with apartment building investing, it deserves to be stated plainly.

  • You will get a lot more apartment building deals done. Although you may have your own cash to invest, there are only so many transactions you can get done. However, if you are able to syndicate, the sky is the limit. Your ability to obtain
    buildings is then only limited by your ability to find good deals. The skill to raise money is priceless.

  • You can do bigger deals. With the backing of investors, you'll be able to go after bigger (and more lucrative) multi-unit property deals than just using your own money.

  • There are more people looking over your shoulder. Whenever you use your own money, nobody else is looking , and you're more likely to make some mistakes. If you're able to persuade other individuals to invest in your deal, chances are, you really have a good deal.

Nonetheless, there are several disadvantages to having investors:

  • You now will need to check in with your new "bosses". Chances are you'll have to provide updates and reports for your investors to help keep them posted. This obviously is more work than if it were just you in the deal. However,
    analyzing the Profit & Loss (P&L) statements and sending out reports make you pay far more attention to the deal. Needless to say, you should do this anyway, but a smattering of us have the necessary self-control when no one else is involved.

  • You may lose some control. You might be unable to make all of the decisions without a vote from your investors. Nonetheless, you can mitigate this possibility with how you structure the deal.

  • You won't be able to keep all of the profits. That is true, but as the saying goes, 100% of nothing is still nothing at all. If you do not need investor capital - great! But if you do, then raise money and get off the sidelines.

In general, however, the benefits of using other people's capital far outnumber the down sides. This doesn't mean you shouldn't use as much resourceful financing as possible. Bottom-line, if you become efficient at raising money from investors, you can get started with buying apartment buildings TODAY.

Thanks for reading this write-up! If you liked this post, you may like my free eBook The Secret to Raising Money to Buy Your First Apartment Building.

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