August 22, 2019
Joe Fairless

Securing Capital and Commitments from Passive Real Estate Investors

You have a vision for where you will be in the booming real estate industry in the next few months, years, maybe even decades. The trick, though, is figuring out how to get there.

The reality is, it’s difficult to boost your bottom line in this business without raising real estate capital from passive investors who are looking for great deals. For this reason, it’s critical that you understand how to secure capital and commitments from accredited investors.

Create a Strong Investment Summary to Attract Investors

If you’re wondering how to secure capital investment, note that your first critical step is to create an impactful investment summary that will entice passive investors to commit capital to you for a particular deal. The investment summary is basically a business plan designed for your target investment property.

With the right documentation, you can effectively communicate your offering to potential investors. In addition, the process of drafting your summary will help you to think deeply about and address critical aspects of your potential deal. For example, as you think through your deal summary, you’ll be able to identify any gaps in the plan and take steps to remedy them. This will, in turn, boost your confidence and show your potential investors that you have something of value to bring to the table.

Questions to Address in Your Deal Summary to Attract Real Estate Capital

If you’re trying to find out how to secure capital investment, here are four important questions to answer in your investment summary, or your deal summary.

First, why are you investing in real estate? Second, why now? Also, why are you focusing on the specific market area associated with your potential deal? Fourth, why are you interested in that specific deal?

You can answer these questions in a few main sections of your investment summary, which we’ll go over below.

Your Real Estate Capital Deal Plan Introduction and Management Team

Your introduction should, ideally, be less than two pages. The intro is essentially a quick summary of yourself, including the fact that you’re a real estate investor and what you’re attempting to accomplish. You’ll also want to briefly spell out how your potential passive real estate investor can benefit from committing capital to you. Besides a solid ROI, what else can you offer them to add value to their own business or portfolio?

Next, you’ll want to explain who is on your team. For instance, maybe you are working with a real estate broker who happens to be the top specialist in investment properties in your city. Or maybe you have an accountant who personally owns several investment properties and thus understands your investing strategy. Perhaps you work with contractors who are able to provide you with renovations at low costs.

The stronger your management team is, the more appealing you’ll look to passive real estate investors, even if you don’t have a wealth of investing experience yourself. And the more likely you are to receive the funds you need to make your dream deal happen.

Your Real Estate Capital Investment Plan Opportunity

In your investment plan, you’ll also want to lay out what exactly you’re investing in. Also, emphasize why you’re so interested in this deal. For this section of your investment plan, it’s critical that you complete extensive market research. Be sure to provide plenty of details so that your future passive real estate investors will know where their money is going.

Your Real Estate Capital Deal Plan Investment Analysis

Crunching numbers is another important step when you’re seeking real estate capital and commitments from passive real estate investors. In this section, you’ll want to convince your future real estate investors why your target deal is such a great deal. After all, your passive investors’ main concern is losing money. Your goal should be to show them that you’re taking the necessary steps to mitigate real estate investment risks so that they’ll not only keep their money but also grow it.

Your Real Estate Capital Deal Plan Exit Strategy

Be sure to also highlight in your deal plan what your deal exit strategy is. Specifically, what will happen if you can’t rent out your new property, for example? Or what will you do if the market ends up crashing? This section of your plan should answer these questions so that your future passive real estate investors know that the capital they give you is protected.

Note that ideally, you should send your investment summary to potential investors in your database only after you’ve met with them in person. Building personal connections is an important step if you’re trying to secure commitments from passive investors.

Next Steps When Creating Real Estate Capital from Passive Real Estate Investors

Once you’ve created your investment summary, you can email it to your target investors. Next, you can conduct a conference call and follow up with them to see who is interested in partnering with you on your deal of interest. Finally, you can send the appropriate documentation to those who are interested in working with you.

As mentioned earlier, you’ll need to demonstrate to your potential investors a robust return on their investment. In addition, make sure that you show them a robust margin of safety. Your goal should be to buy an investment property for a low-enough price that adverse conditions in the market—like price declines in the market—are not likely to impede your and your investors’ gains long term.

Start Securing Capital and Commitments from Passive Real Estate Investors Today!

If you’re interested in attracting real estate capital for future deals, it’s critical that you understand how to build connections with passive real estate investors and market possible deals to them. Fortunately, you don’t have to figure out how to secure capital investment all by yourself.

Contact me today to learn how to secure commitments from investors and thus turn your dream deal into a reality. Or, work with me on one of my investment deals!

Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.

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