The Ultimate Guide to Creating a Real Estate Investment Deal Summary

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Deal Summary for Real EstateAre you planning on raising money in a joint venture or from a private lender? Are you ready to have conversations to get the cash? Let’s just see …

Imagine you have $100,000 to invest in a deal. Who are you going to work with?

Meek Megan, who has slouched shoulders and lowered eyes, looking away from you frequently, saying:

“I know you’re busy so I want to thank you for taking time out of your day to meet with me. I would like to talk with you about borrowing $50,000. It’s for this deal I am working on. I think it’s probably a good deal. You know my realtor said it is probably worth about $300,000 and I am buying it for $275,000. I have tried everything to come up with the money. The bank says they will finance me if I can put down 25% so I have to raise that money. I know real estate isn’t your thing but it would be such a big favor to me if you loaned me the money for the deal.”

Or, Confident Courtney, who looks you in the eye, holds her head high with her shoulders back and says:

“I am so glad I had time to meet with you today. Thanks for your interest. This deal I am working on is pretty cool. I have an accepted offer on it for $275,000 and it’s worth $300,000. After a paint job and some landscaping which will cost less than $5,000 I believe we’ll get $2,000/month rent for it. It’s in a really great area and I already have a few tenants interested in it. I’ve got a lender lined up, I just have to bring in a partner who can qualify for financing and put in the initial $60,000 required for a down payment. I can’t make any guarantees, but based on mortgage pay down and cash flow, even if the property doesn’t go up in value a cent, the person I work with to fund the deal should make at least 10% a year on the deal each year, probably more.”

Clearly, Courtney is getting the money.

But, Megan and Courtney had the same deal to offer so what was the difference?

Coming into any conversation confidently is trickier than it sounds. Few people can fake confidence, so you have to build it from within.

I’ve always found that if you’re worried that someone is going to object to something or think you’re not experienced enough, that is the VERY thing they will say or think.

You have to believe in you and what you’re offering before anyone else will.

This has next to nothing to do with having the right documentation and everything to do with you, your expertise and your ability to communicate the offering. The right paperwork and marketing materials really aren’t part of a successful conversation, except to make you feel like a prepared professional. If you’ve taken the time to develop an extensive deal summary, or business plan for your investment property, you’ll have thought through what you’re offering and will feel like you are bringing a lot of value to the table.

So what do you need in a deal summary?

The first thing to prepare for any conversation are your answers to the 5 Why’s. These are the key points you’re going to cover in your presentation. And, they are the things you’ll figure out the answers to when you create your deal summary.

Those questions are :

1. WHY YOU?

2. WHY NOW?

3. WHY YOUR MARKET AREA?

4. WHY THIS DEAL?

5. WHY THIS STRATEGY?

This video walks you through these questions and explains, briefly, what each means:

Your deal summary, which is pretty much a business plan for an investment property, addresses these questions. Creating the deal summary is less for your prospective partner than it is for you!

<NOTE: You should never SEND this deal summary to a potential investor via email before you meet with them. It’s probably more beneficial to send it to a space station than it is to send it to a potential investor in advance. Emailing a deal summary – no matter how beautiful or comprehensive it is – does not raise money or uncover partners.>

You might expect that a business plan is important as a presentation tool but the reality is that the business plan is critical for you! You should rarely, if ever, actually use it during the course of a presentation. It’s great follow up material. It’s nice to mention in the conversation, but pulling it out in the middle of a conversation, will completing change the focus of the presentation. Try it … when it doesn’t work, go back to keeping it in your bag for the end.

We no longer create a deal summary for each of our deals. We don’t need to. We know what to say and we don’t even give a copy to our investors so it’s not necessary anymore. We have past deal summaries to show them as examples and we ALWAYS prepare an executive summary (1 page document with a picture and key numbers of each deal). But, when you’re first raising money, the deal summary is a CRITICAL piece of your preparation.

Doing the work to create one forces you to spend time thinking about each of these key questions. You will have to do research for your specific market area and deal types. When you carefully think through a business plan you will identify gaps in your plan, work to correct them and this process will build your expertise and confidence. When you write the deal summary you will also be crafting the answers to questions that will come up from partners and lenders.

Well thought out answers to questions demonstrates that you are a professional and have considered all the elements.

With that in mind, here’s a quick review of all the main sections that should be in your Deal Summary:

1. Introduction:
This should be no more than 1 or 2 pages and is a quick overview of who you are, what you are trying to accomplish, and what’s in it for the Partner (quick overview of the five WHY’s).

2. The Management Team:
Who are you? Who is on your Team? Why would I want to partner with you (vs. the competition)? “Money follows Management” so if you are light on experience, you have to be very strong in at least one other area (market area expert, huge network, relevant trade expertise, etc.). Then support that with a team that you can confidently boast about. For instance when you reference your team, you could say my realtor is the #1 investment property specialist in the city, my accountant owns over 10 investment properties himself so understands our investing strategy, or my brother has been a licensed carpenter for over 10 years and specializes in low cost renovations. Your prospective Partner is always most concerned with “what’s in it for them?” They want to work with someone who is confident, capable and has a great team (WHY YOU!).

3. The Opportunity:
Where are you investing? What are you investing in? And most importantly, WHY are you investing there? This section is where it’s imperative that you have done your market research. (Please note: we do not teach you how to properly conduct your market research in this program. If you wish to learn how to do your due diligence on a market, please contact us at info@revnyou.com for a special offer on our program.). Again, your Partner will want to know the What, Where, and Why of your opportunity. This section should include enough details to give your Partner an idea of where their resource (money, time, expertise) will be going without overwhelming them with pages and pages and pages of data. (WHY NOW? WHY THIS MARKET AREA?)

We have a Properties with a Cause Model that we follow and always discuss.

4. The Investment Analysis:
The “numbers” are not as important as you might think. Most investors just want to feel confident that you’ve done them. This section ensures that you have run the numbers carefully and have thought through the strategy. (WHY THIS DEAL? WHY THIS STRATEGY?)

You might be focused on how much your investor can gain but most investors are more worried about ensuring they don’t lose their money. Most people react to fear of loss or the threat of pain more strongly than they do the potential for gain. You need to show them that you’ve thought through the risks and are taking care to mitigate them where you can.

Once a potential investor has a basic understanding of what they can gain, they typically turn their attention to all the ways they can lose their money in this deal. The “numbers” in this section will demonstrate that you have covered all the bases of this investment opportunity. Include enough detail and clarity that the person can follow along and understand “what’s in it for me” from their perspective.

Also see, how to analyze your deals, and why you’re the only one that can.

5. The Joint Venture Structure:
This part of the summary clearly identifies each persons roles and responsibilities are for the duration of the joint venture. This article discusses JV Structure.

6. Exit Strategy:
When will I get my money back? How do I know this will work? Why are you using this strategy? What happens if it doesn’t sell?….we can’t rent it?….the market crashes? This section should be focused on answering these questions. Your investor really just wants to know that they and their money/credit/resources are protected (WHY THIS DEAL? WHY THIS STRATEGY?). This section really becomes a lot of the material you’ll use when you handle objections in a conversation (although, the more confident you are with your strategy and what you offer, the fewer challenges you’ll face from potential investors).

7. Appendices:
This is the last section of the Deal Summary and is not always necessary. We use this section to demonstrate our expertise and market area knowledge. It really supports what you’ve already demonstrated in the other sections. Here’s where you can include articles you’ve been featured in, references to awards you’ve won, key references in the media to your market area or your strategy, and anything else that would be useful to reference regarding the deal. Testimonials from other happy partners or investors are also a nice touch for this section. If you’re a renovator, before and after pictures can be a great piece to add here as well.

For us, if a potential investor goes through the Appendices in detail, it’s a good sign they are probably not our ideal investor. Most people will just flip through it to see if anything catches their eye.

The Appendix, for us, is a good place to keep really important credibility boosting pieces or high value articles, that you might want to reference in the future.  can really have anything you want in it but please check out the sample deal summaries we have included to get a sense of what we use. Make it your own and of course, make it useful!

Nothing replaces the face to face part of raising money. You have to have a lot of conversations to get cash for doing multiple deals. Having a high quality and well thought out deal summary will boost your confidence and reassure an investor, so it’s important if you’re new to raising money or investing, but it’s not the most important thing you can do. The most important thing you can do is become an area expert, have a great team, master your strategy and learn how to have a compelling conversation that you control.

If you need help with any of that … April 25th & 26th, 2015 we’re holding our final workshop on Funding Your Deals in 49 Days – the ultimate workshop for learning how to have conversations that you can use to have people ASK YOU about investing in your deals. You just might want to mark your calendar and plan to be there. Details coming soon.

Julie Broad