How to Break Up a Real Estate Joint Venture

April 17, 2020March 8, 2015 by Julie Broad

“What if my investor wants out of the joint venture deal?”

Our worst partnership was created when I was more focused on my new career after graduating from my MBA than I was on our real estate portfolio. It was 2004. Dave had begun to dream really big and had met someone to work with on these big plans.

This guy was a creator and innovator. He had started a company that was growing rapidly and was already winning some business awards. He was an idea man and was well connected to a lot of people with money who would be keen to put it into real estate.

The two of them thought that they could create a syndicate with this guy’s contacts and Dave’s expertise. Dave spent hours and hours meeting with him and planning the syndicate. They did a couple of deals together and planned to do a lot more.

I was busy with school and was not interested in a syndicate. I also didn’t think this was the guy to do it with. He was controlling and yet scattered. He insisted on being involved and yet was hard to get in touch with.

Dave was frustrated with the challenges he faced in working with this guy but continued to push forward as he saw the potential. When they had the first two under their belt, Dave found a couple of other ones. Dave made offers but Dave could not get him on the phone. He had to let those deals go (those deals promptly doubled in value so Dave was pretty upset he’d relied on this guy instead of doing them without him).

He couldn’t even get in touch with this guy to discuss the properties they already owned. Sometimes it would take 2 weeks before Dave would hear back from him.

Eventually Dave accepted it wasn’t working. So he needed to break up the joint venture.

This is the only time we’ve had to break up a joint venture. We quickly realized how important it was to only work with our ideal investors. So what are your options?

First, prevention is the best medicine.

You may pursue Joint Ventures (JVs) for flips, big deals like apartment buildings or commercial developments and your specifications of what you’re looking for may be different than what we do (see structuring real estate Joint Ventures). For us, we tend to look to private lenders for money for anything outside of buy and hold residential deals and rent to owns. There are a lot of reasons for that but the biggest reasons are the increased risks and the increased need that someone has to be on the same page as you for the future financial requirements of a deal (we’ll be teaching you how to find private lenders and joint ventures in April in Toronto). We prefer to handle those issues on our own and work with a joint venture for the more stable investments like small multi unit or single family buy and holds and rent to owns.

In those cases you want to make it clear that you are looking for a minimum of a five year commitment. You want this even for rent to owns because if the deal doesn’t close as expected it likely will be a property you hold for close to five years (or longer) (see why rent to own investing can stink).

In our agreement we state a minimum hold of 5 years or an increase in value of 25% before either party can exit.

Despite the prevention measures, life happens. If it’s time to exit, someone needs out or the relationship is challenging and you want out, what are your options? These need to be spelled out in your joint venture agreement, but here’s a few options for you:

Right of First Refusal – if the term has completed and one of you wants out the other partner has the right of first refusal to buy them out. This ensures that either party doesn’t turn around and try and sell the property from under the other party. It gives the other partner a chance to buy the person out before they sell it to the market (a third party).

What does that process look like? Your agreement needs to spell out how you determine fair market value. For most people you will get an appraisal done and if both parties agree with the appraisal or the value then the one party may buy it from the other for that price. We allow for the average of two appraisals to be taken to determine fair market value in the event that the parties don’t agree on the value of the first appraisal.

Splitting the Chocolate Bar – Now, if you have not reached the five year term, if that is what you agreed to, (or the value hasn’t increased by 25% as per our agreement) and one partner wants out, our approach to this is something we call “splitting the chocolate bar”. Other people might call this a shot-gun clause.

If one party wants out before the contractual time frame this is how we handle it.

Imagine you have a chocolate bar. One party breaks it in half and the other one picks which side they want first. If I am breaking it to share I am going to split it as close to the middle as I can so you don’t take a bigger piece from me.

If, however, I am a crazy person that doesn’t like chocolate, and I don’t want to end up with the chocolate bar, I should break the bar so that there’s a bigger piece for you to take so you are more likely to take it.

Taking this to the property to explain the concept: the person who chooses the value would be the one that wants to break the contract. The other person determines if they will buy the property at that price or sell it to you. If you want me to buy you out and you’re choosing the value, you would be wise to offer it to me at a slight discount so I am motivated to buy it from you (or it’s attractive for me to bring someone else in to replace you in the deal). I basically get the choice of whether I buy it from you at that price or sell it to you at that price. If you get too greedy I can tell you to buy it from me.

For example, I know the property is worth $240,000 but I want out. When I decide the value of the deal I might say $220,000 to give the other person an incentive to buy from me. If I say $240,000 there is a good chance the other party will say “Ok I’ll sell it to you for that!”

If you are in the position where it’s favourable to buy out your partner but you can’t qualify for financing or you don’t have the cash then you can consider bringing in a new person to replace your investor. If they have made the price attractive enough and it’s a good asset, you should be able to find someone to take their place. You could also look at private money if the cashflow is strong enough to cover the higher cost of a private mortgage. And, if all else fails and you can’t buy them out when they want out no matter how attractive they make it for you, you’ll have to put the property on the market.

How Do You Determine Fair Market Value?

It’s easy for us to determine fair market value for most of our properties because we are hands on and very active in the market. We know what is selling and for what price. But for the purposes of splitting off a partnership or where fair market value needs to be determined, we spell it out in our agreement how the valuation will be done.

You should include something in your agreement that spells out how fair market value is calculated. Our agreement typically states that each party hires an appraiser and take the average of the two appraisals.

Timeframe:

We have a term in our agreement that says that the property will be held until the property appreciates by 25%, or we’ve held the property for 5 years. When one of those conditions is met, either party has the right to sell – and the other partner basically can’t refuse. This is when the right of first refusal kicks in.

If one of you wants out before either of those conditions is met, for example if your partner wants to sell after three years and the property has only gone up in value by 5% it’s probably not advisable to sell. In that situation you would use the ‘splitting the chocolate bar’ method to separate.

One of the questions most people will ask you is when they will get their money back. As we’ll discuss shortly, the most important thing for you to do is align your investments and your strategy with the right people. In our case, buy and hold real estate investing, we’re always holding for the longer term. Our ideal partnerships are those that really don’t have a need for the cash anytime soon. We want to hold for as long as possible to maximize the return and profit. That can take more than seven years depending on where you bought in the real estate cycle. We would prefer someone who is continuing to generate income and is using this as part of their overall income strategy to grow their wealth. As a result they won’t need their money out until we believe it’s the best time to exit. But regardless, everyone wants to know when they will get their money out so having something in your agreement that shows them there is, in fact, a way to end and get their money out will give them comfort.

And since we’re talking about breaking up a joint venture, let’s talk about a darker subject.

What Happens If Someone Dies? The incapacity Event

This is a subject nobody likes to consider, but it is important.

For your own comfort and that of your loved ones, you should know what is going to happen to your properties if you pass away. For your partners assurance they need to know you have a plan.

For your assurance you need to know your partner has a will so the property doesn’t get tied up in probate hell for years.

We spell this out in our agreement and you should too. It outlines what happens if someone can’t make decisions anymore or they pass away.

In our case, if Dave or myself were to be incapacitated, the other would just take over. We run our business together and while Dave handles more of the day to day operations, I am capable of running the entire business. If we both were to pass away, we have a real estate experienced lawyer who is our executor and he would take over the managing role.

We have it spelled out that he would contact the JV partners and review the options.

One of my coaching clients was concerned about what would happen if she passed away. Her husband is not involved and she fears the amount of stress it would put on him if he had to manage the properties himself. My suggestion to her was to hire a property manager for at least one of her properties so that she built a relationship with someone who could take over all of the properties if something were to happen to her. I also suggested she create a spreadsheet that outlines all the important information for each property (including bank account numbers and passwords). Keep that locked in a safe and up to date.

It’s not a foolproof plan, but it’s much better than no plan at all.

If something happens to your JV partner and they’ve qualified for financing what is going to happen to their side of the deal? Does it transfer to a spouse? Do they have insurance that will pay out the debt? Just like you have to cover your side of the deal, you also need to understand they have their side covered.

In most cases, in the event of death, you’d probably sell the asset or the surviving party would buy out the estate of the passed partner. The important thing is that there is some commentary around that. Ensure you have that conversation with your JV and with your lawyer.

As with every legal document there are a lot of areas to cover and this is not every single detail. I am also not a lawyer nor have I had any legal training. This gives you some critical elements to discuss with your real estate specializing lawyer when you get your own document drawn up but should not replace the advice of legal counsel.

Joint ventures are a great way to grow your portfolio but it’s a business relationship. It’s important you treat it like that and consider the ways to exit the deal as well as all the ways you’re going to find people to enter a deal with.

You are about to become a compelling conversationalist that attracts money right to your door.
Eliminate the fear you have around asking for money for your deals – forever.

Natural born salespeople need not apply – this is for folks who aren’t sure how to structure their joint ventures and lending agreements. This is for people who feel uncomfortable pushing their money raising agenda in front of people. And, this is absolutely for people who want to learn how to be comfortable AND confident when they talk about their deals with other people.

There’s no fancy techniques or slick selling tactics. What we teach is what we do … We don’t teach weird sales tactics. We teach you how to have people COME TO YOU!

You don’t have to register today, but you could miss out if you don’t.

Get the details and get registered right here ===>>http://jointventurerealestate.ca/

Getting the Money for Your Real Estate Deals

December 28, 2012December 27, 2012 by Karysa

Even after 4 years of running our real estate investment business full time, eleven years of history of never missing a mortgage payment on any property, and a substantial net worth, we still find it challenging to finance our investments. In September we bought an beautifully cash flowing triplex. In order to finance it with the bank we had to show 3 years of mortgage and interest payments just hanging out collecting dust in a bank account. That’s on top of the 25% down payment that also has to be sitting in a bank account for 30 days before we even apply for the mortgage.

We bought it for $325,000. In order to even apply for the mortgage we have to have about $130,000 in cash just sitting around.

If you are starting to think about becoming a full time real estate investor and leaving your job, I encourage you to finance as many properties as you can while you have what the bank perceives to be a secure job. You’ll also want to start planning for your funding and financing future (one of the best ways to do that is to join us for one of our Fund Your Deals in 49 Days LIVE training events – we’ll help you build a funnel of sources for funds!).

The good news is that you do have some options when the bank says no or you don’t happen to have hundreds of thousands of dollars sitting around so the bank will say yes.

No Money Down – No Bank Needed

If you watch late night infomercials you’ll probably feel some attraction to the no money down, no qualifying at the bank strategies. We’ve been right there with you … not once but twice. We’ve invested almost $40,000 into learning “no money down” and no bank needed investment strategies.

The biggest lesson I can share with you is that just because you can do deals with no money down doesn’t mean you won’t need money.

Sandwich leases are a popular one these days for Canadians that want to do no money down and no bank needed type deals. A sandwich lease is simply where you find someone who will allow you to lease option their home from them and you turn around and offer it as a rent to own to someone else. You pocket the difference in monthly cash flow and option fee.

In theory this is a great strategy. The reality isn’t as pretty. It takes a lot of marketing effort to find the deals. It also takes a lot of effort to educate and explain what you’re doing to the seller. Finally, you’ll find the houses are generally in a state of disrepair and need some investment to improve them so you can attract good rent to own tenants. How much money do you want to put into a house you don’t own? The final issue is that it rarely works out that your lease option term aligns with the term that your rent to own tenants are able to buy within. It’s tricky. Your upside is limited in this type of deal and while you CAN do it without the bank, we find most investors get into this type of deal really excited and work hard for a year or two and then look for something new because it’s so much work for a minimal pay day.

Generally when we did creative deals – whether it was a sandwich lease, wrap mortgage or some sort of seller financed strategy – we ended up with problem properties and challenging tenants. We basically created a full time babysitting job for ourselves. That is because the kind of deals you can do creatively generally are not the great properties in good areas. They don’t attract the best caliber of tenant nor do they have minimal maintenance requirements.

The no money down and no bank needed strategies work but they didn’t work for the life and business we wanted to create.

The strategies we use to fund and finance our deals include Vendor Take Back Mortgages, Private Money, RRSP mortgages and joint venture partners. Sometimes we use a combination and other times we just use one. These strategies allow us to focus on doing great deals in areas that attract the best tenants. Our tenants typically love their homes like they were their own, apologize when they are late with rent or give us a heads up that it might happen, and rarely call us with problems. That’s because we focus on doing the deals that allow us to create a business and life we love instead of doing deals just because we can do them creatively or with little money down or no banks.

4 Great Ways for Getting the Money for Your Real Estate Deals

Vendor Take Back Mortgages

Seller financing, more commonly called a VTB or vendor take back mortgage is simply where the seller (Vendor) of a property is willing to provide some (or all) of the mortgage financing on that property.

Seller financing can take several different forms. We’ve done deals where the seller provided the entire mortgage, which amounted to 80% of the property value. We paid her 6% interest amortized over 25 years for a 3 year term with no prepayment penalties and an option to renew. She was able to sell her house in a slower market and made more money from it than she otherwise would have through three years of interest payments. We also have used seller financing to top up traditional bank financing.

Private Money

Private money is simply money from an individual. It’s different than hard money. Hard money lenders finance deals for real estate investors as a business. They are more sophisticated in their investment terms and will typically seek quick repayment at high interest rates. With private money you can have more control over the terms of the loan. You can offer terms that suit your needs and offer a good return for your private lender.

The easiest way to find private money is to call your favourite mortgage broker and ask if they have any private lenders. That money is expensive thought. The upfront fees on those funds alone are usually1-3% of your mortgage amount. On a $250,000 mortgage that means up front you can start off with a $7,500 fee plus pay at least 7% interest on the loan. That’s ok if you’re in a pinch with a strong cash flowing property, but our preferred source of private funds is to raise them ourselves.

We find that a lot of folks have paid off their homes and are willing to put a line of credit on the property and loan that money out for a premium. One of our favourite strategies is to borrow $350,000 from someone’s line of credit to buy and renovate a property. We paid them 5% + their line of credit costs. (See an example of a property we’re doing this on right now in our video series on adding a legal suite to a property).

RRSP Mortgages

Mutual funds and stocks are not the only investments that are RRSP eligible. A mortgage can be held in a self directed RRSP (or RESP, LIRA, or RRIF) account. This is probably the largest untapped source of funds available to real estate investors because very few people know this option exists.

Master this and you’ll always be able to find the funds for your deals. With no management fees or advisor commissions to pay, RRSP holders could be making a stable and predictable 6, 7, even 10% or more return on their money inside their RRSP.

There are some additional rules around using RRSP funds though. For example, you can’t borrow funds from your immediate family to fund your investments. It needs to be arms length. You also can’t use the RRSP funds for a down payment directly on a property. You’ll need to put the funds on a different property as a first or second mortgage and then use those funds on the new investment. **We now cover using RRSP funds in our Fund Your Deals in 49 Days Live Training**

Joint Venture Partners

This is the most powerful strategy in our investment tool box. It’s the strategy that has allowed us to comfortably add a new property to our portfolio almost every month.

Our joint venture deals typically are structured so that we find the deals, oversee all work and management and split the proceeds 50% / 50% with our partner. In exchange for all experience and efforts, our partner puts in the cash required to close on the property and puts their name on title so they qualify for financing from the bank.

If anything goes wrong with the property and requires cash we are partners and split the costs 50% 50% just like we split the proceeds.

Busy people love this option. They don’t want to spend the hundreds of hours we’ve spent learning an area, building a team and digging up deals. And they definitely don’t want to take calls from tenants or handle issues around the property management. They can get into real estate without the hassles of being a landlord.

There are a lot of ways to fund your deals – even if the banks say no. The key is to know where to look, what to say, and what choices make the most sense for you and your goals.
Photo Credit: © Charles Knox Photo Inc. | Dreamstime.com

The High Cost of Real Estate Investing with Family and Friends

March 22, 2013April 28, 2012 by Julie Broad

“The biggest thing holding me back right now is lack of money for deals. I’ve done some joint ventures but I am struggling to raise more money,” shared a real estate investor I met recently. As we continued to chat I asked about the joint ventures he’s done. His real estate investing success to date has only been by raising money with immediate family members.

And it actually took him 3 years to convince his sister and brother in law to work with him in the first place! The toll that is taking on his confidence and his emotions is huge. It’s so huge he doesn’t even know the price he is paying but I could see it written all over his face.

One of the worst things you can do to yourself and your family (and even close friends) is try to raise money from them.

We’ve learned this the hard way – and it took us years to clue into the price we were paying.

When you try to raise money from people you love and who love you, you’ll find that one of three things happen and each one comes with a GIGANTIC emotional price:

They don’t want to say no and hurt your feelings so they avoid you or avoid the subject. It becomes awkward and strained.
They say yes only because they want to support and help you. Subconsciously you KNOW they are investing with you because of your relationship and it plays enormously on your confidence and your ability to raise money outside of the family.
They say no and you feel hurt. “Why don’t they trust me? Why don’t they believe in me?”

This is all assuming things actually go well on the deals you’re doing too. The price you will pay if something goes wrong can be monumental.

The Even Higher Cost of Real Estate Investing with Family When Things Go Badly

One investor I know got into investing with his brother. He spoke so fondly of how the two of them brought their big families together every year for major holidays. All 40+ family members would pile into a warm, love and laughter filled house to celebrate the season and each other.

This happened for many years until a real estate deal the two brothers did together turned bad and suddenly they couldn’t stand to be in the same room together.

Now, the entire family is torn apart and there are no festive get-togethers anymore.

This is not my story, but it is a true story. The investor that generously shared this story with me in the hopes that others learn from his situation said that “When we first got into REI, looking back on it, I was blinded with excitement about getting into the game that I really didn’t step back and figure out whether my values and goals matched up with my family members. I really wish I would have figured that out sooner, as I soon found out that my idea of an acceptable rental property was not their idea of an ideal rental. The way I handled tenant-landlord issues was also different. I always found myself defending my decisions … and at the end of the day I felt like an employee, not a partner, so I really had no choice but to leave.”

He seemed so sad and regretful. I can promise you he wishes he had never mixed family and real estate.

I recently met someone else who brought his parents into a deal four years ago that cost his parents an unstated sum of money as the deal ended up totally falling apart. All money invested into the deal vanished. The money was definitely a loss but the real cost of that situation in my view is the tremendous guilt this guy feels about the mistake. It weighs heavily on him every single day. I am not saying he wouldn’t feel guilty if he’d lost someone else’s money but I am suggesting that the guilt he feels over his parents is far greater because he knows they invested in HIM more than the deal.

Investing with family members can be tremendously rewarding when things go well but there are a lot of areas where things can go bad. I believe the RISKS of raising money from your family are higher than with anyone else you can work with.

That is what you have to watch out for. Most of us would much rather have our familial relationships than a few extra bucks from a real estate deal.

Before you even get into a business relationship – whether it be a loan, a partnership or a corporation – with any of your close family members:

1. Is there really a good fit? Is everyone bringing something of value to the table? What is most important to each person? Is there alignment in that?

A lot of times the ONLY reason you’re lending money/borrowing money or working with someone IS because they are a family member. That is absolutely the WRONG reason. Philip McKernan (author of two best selling real estate books and business coach) suggests that borrowing money from close family is not a good idea because they can never clearly evaluate the deal or the risks. They are blinded because of their close relationship to you.

Have an open discussion about risks, problems and the kinds of deals you’re going to do. If you aren’t on the same page about what types of deals you’re going to do and the kind of tenants you want to work with, it could be a huge horror story. You’ll find you are always butting heads and constantly working harder than you need to just because of the drastically differing opinions.

2. Discuss roles and responsibilities – then put them in writing

This is one of the challenges we faced over the last few years with our corporation. When we first started my Mom and Dad provided our new corporation with some short term loans. Dad was handling nearly 1,000 calls from potential seller leads, my Mom was overseeing renovations, and Dave and I did everything else around negotiating, managing and raising money for the deals. After a year or so Mom and Dad started getting tired of working so much and were not interested in putting more money into the company – short term or otherwise.

That left Dave and I to fund anything that the company couldn’t fund itself AND do all the work. Even though we knew this would be the case when we started the corporation, Dave had some hard feelings about this for awhile. It could have festered into a big issue but we had a corporate meeting and revised our roles, responsibilities and compensation levels.

At the start of investing together as a family, we had a legal contract for our business drawn up and had some roles and responsibilities laid out in that agreement but we hadn’t CLEARLY outlined roles, responsibilities and compensation. We’ve now done that and, quite frankly, we may just get to the point where we come to an agreement to buy my parents out in the near future.

In any company, roles, responsibilities and compensation have to be clear and fair or there can be hard feelings. Family is no different.

3. Treat the business relationship like a business relationship. It’s very common to go easy on a son or daughter or even a parent when you know their personal struggles. It can also be possible that you’ll take advantage of the fact that someone knows your struggles to use as an excuse to not live up to a commitment you have made. But a commitment is a commitment in business – and it has to be the case when it’s family.

One investor I know put $20,000 of his own money into a few troublesome properties because he didn’t want to make a cash call to his relatives. He put MASSIVE financial strain on his wife in order to save face with his parents and siblings.

It all stems from the fact that the core of the relationship is an emotional one not a business one. If these were non family investors who evaluated the deal and the investor on it’s business merits versus invested in the deal because it was their brother or son the cash call would have been easier.

4. Create Work / Home Boundaries

My biggest pet peeve of getting into business with family and even friends is that sometimes social get togethers become impromptu business meetings. I live, work and play with my business partner so it can be REALLY hard to separate work and home. That gets exponentially more difficult when we visit with my parents. We try to set the boundaries so we know when a lunch is a meeting versus a family catch up time. We create agendas for our meetings and take care to ensure that get togethers aren’t impromptu business meetings.

5. Communication is critical. Assuming is deadly.

This could be an entire book and it probably is somewhere, but the big thing is that you can’t assume that you KNOW what someone is thinking just because you’ve known them all your life. Ask for each person’s view and LISTEN. Watch for nonverbal cues that someone is holding back and be prepared to push for honesty. Be as quick to express positive results and outcomes as you might be to point out issues and challenges. Finally, focus on one issue at a time. Make sure expectations and plans are clearly articulated before moving on to the next issue. Write it down for even better results.

Creating a successful business requires all of the above regardless of who your partners are. It just becomes a slightly different situation when you’re working with family members because of the blood ties and lifelong relationships you have.

It can be fun to work with your family. It can be satisfying to come together and create something great together. There can also be enormous challenges if you aren’t partnering with the right folks for the right reasons. Hopefully you’re now ready to take a step back and decide with different eyes. For me, it’s not about telling you NOT to invest with your family (I do and I have!). What I am saying is there is a BIG price and you must weigh that carefully before you proceed.

Published April 18th, 2012

2 Things That NEVER Work When Raising Money For Real Estate Investing

March 22, 2013November 1, 2011 by Julie Broad

Quick – you need to get $25,000 for a renovation on one of your rental properties. That renovation will allow you to add another suite and increase your monthly positive cash flow by $800/month. It makes great business sense to do the work but you don’t have the cash.

Your line of credit is maxed out because you used it for a down payment and now the bank isn’t interested in lending you any more money. What do you do to raise money for real estate investing?

There are lots of options to get money for real estate investing but unless you can (or want) to tap into equity in your home with a refinance, all the options you have require that you raise some private money.

Private money is simply money from an individual (instead of a bank or credit union). It’s different than hard money. Hard money lenders finance deals for real estate investors as a business. They are more sophisticated in their investment terms and will typically seek quick repayment at high interest rates. With private money you can have more control over the terms of the loan. You can offer terms that suit your needs and offer a good return for your private lender.

The easiest way to find private money is to call your favourite mortgage broker and ask if they have any private lenders. Most mortgage brokers work with a few wealthy folks that have money to lend or they will refer you to a mortgage broker with private money connections. If you have decent credit and the property generates a solid cash flow you should be able to find money this way, but that money is expensive.

The upfront fees on those funds alone are usually 1-3% or a minimum of a $2,000 fee (whichever is greater) of your mortgage amount. On a $25,000 loan or mortgage that means up front you can start off with a $2,000 fee plus pay at least 7% interest on the loan. That’s ok if you’re in a pinch with a strong cash flowing property, but there are much better alternatives. And those alternatives are usually found by reaching out to friends and family for referrals or getting out there and meeting some other folks interested in real estate investing.

The goal is to get a face to face meeting with people. In that face to face meeting you can look each other in the eye and determine if there’s a good fit to work together, you can assess what each person brings to the table and make sure you’re offering a deal that makes sense for both of you. In ten years and millions of dollars of other people’s money raised for our deals, we’ve only ever ONCE raised money without a face to face meeting. In that one case it was with someone we had a long standing relationship with and, quite frankly, we gave him the best deal we’ve ever given anyone because we found ourselves in a bit of a last minute bind.

Generally you have to have ONE face to face meeting to move your money raising efforts forward. But most people never get to that face to face meeting because they do one of two things that cause you to fail almost every single time. How do we know?? We messed up dozens and dozens (ok probably more like a hundred) opportunities before we figured out these deal killing mistakes. Today I am going to hand them to you on a silver platter to save you a lot of trouble and a lot of headache from banging your head against the wall wondering why things aren’t working!

2 Things that NEVER Work to Raise Money for Your Deals:

1. Email
I don’t like the telephone. Unless I am expecting a call I don’t answer the phone. My preferred mode of communication is in person, or via email or text. So to get to the in person meetings I tried REALLY hard to find a way to raise money via email. I used all my writing skills to write compelling emails. I spent hours writing people personal well thought out messages. I sent dozens of emails.

The result? I felt lousy because EVERYONE ignored me except a few really polite friends or family that would send back some very awkward email saying “thanks for thinking of me I will review this later.”

Then I started to get annoyed at how rude people were … until I realized it wasn’t them … it was ME!!

Email does NOT work. I don’t care if you have the HOTTEST deal to hit town in a decade, email is going to flop 99% of the time.

Email only is an effective tool after you’ve met with someone and they have indicated that they want to work with you. Save yourself time and embarrassment and DON’T EMAIL PEOPLE your deals and ask them to work with you. Yea – email feels easier at first because you avoid having people say no to your face but the reality is that all people will do is ignore you so it’s ineffective and a waste of time.

2. Spilling your candy in the lobby
This was the lesson Dave learned. He LOVES to talk on the phone. He loves to catch up with his friends and family and learn what people are up to in their lives. He also gets pretty excited when somebody asks what we’re doing. So … he would get on the phone with someone he wanted to set up an in-person meeting with and when they’d say “What are you up to these days Dave?” he’d proceed to basically tell them everything about what we’re doing with our investments negating the need to get together. The problem is that you pretty much HAVE to get that face to face meeting to get the deal done.

Dave wasn’t sure what he was doing wrong so we called up our friend & private money raising expert Patrick Riddle (www.mustknowinvesting.com) and asked what we were doing wrong. He simply said “You’re spilling your candy in the lobby and there’s nothing left for the show.”

You want to give people a reason to meet with you and if you tell them everything that you’re doing on the phone then there’s no reason to meet. You have to keep the call brief and interesting. Give them a reason to meet with you and then get the date and time set up.

One of the best ways to do this is simply say “Jason I’ve been driving by your car dealership and I keep thinking that I really admire and respect what you’ve built with your business. I’m working on a few things and I would really appreciate your opinion. Have you got time next week so I can pick your brain and buy you lunch?”

Nobody ever says no to that kind of invitation and next thing you know you’re having a lunch, learning and finding money for your deals!

Of course … now you might be wondering what you say when you get to the in-person meeting but that’s a little trickier than we can cover in one little article!! Simply stated your objective is to get an understanding of whether your investment program is a good fit for their needs. If it is, confirm their interest and let them know that you will follow up when you have a specific deal that fits their criteria (or present your deal!). If it isn’t, then ask if they know anybody that might be interested.

Image Credits: Dreamstime

Published November 1st, 2011