I get asked quite often from my clients, “Should I raise the money first or find the deal first?” My answer has always been to do both simultaneously. The 2 highest value skills to being a great real estate investor are the ability to find good deals and to raise money. If you aren’t doing either, you don’t have a business. One of the greatest qualities I see in successful real estate investors is their ability to market for discounted real estate. The ones who are out there in front of home owners, running numbers, negotiating great deals, consistently win over the long haul. On the flip side if you are great at locking up deals but don’t have the capital to purchase them you aren’t going to go far in this business.
One of my mentors would always say, “Money is always chasing good deals”. As i got more experience under my belt this phrase started making a lot more sense to me. I then realized what he was saying and the power of that statement. Even if I didn’t have the capital but I had found a great opportunity and numbers were excellent, it wouldn’t and take me long to find the money.
Raising capital and approaching potential lenders becomes much more fluent when you have a deal to bring to them. This is not to say you shouldn’t be doing them both at the same time as I had mentioned, however sometimes you don’t know what will happen first. There are so many lenders out there who aren’t happy with the current returns they're getting in the marketplace. They're open to the idea of a better place to park their money. Most lenders aren’t aware or don’t have access to someone like a real estate investor who can help them make a better return on their money. Your job as a good investor is to seek out people in your inner circle, friends, family, co-workers and offer them an alternative to what they might be doing currently to get a return. Having sold mutual funds for sometime before getting started in my real estate career I can tell you first hand there are many funds out there that are paying subpar returns, especially with high MER’s (Management Expense Ratio's) eroding most account holders returns and factoring in taxes and inflation.
A great benefit of investing in real estate is that there aren’t any MER’s to manage ones money when they invest in your deals and it’s a great hedge against inflation. What also adds fuel to their returns and your profits is that if your looking for properties that are being sold at $.40-$60 cents on the dollar you're creating a cushion for both parties. This is where the money is made. Whether your doing a short term flip or long term hold. Buying the property under market value with an opportunity to force the appreciation by buying using this formula or adding renovations and forcing the appreciation of the home will amply your returns.
I challenge you to make a decision to become the very best you can at these 2 skills and watch your business explode. The right opportunities and people will come to you if you are consistently taking action daily.