Many real estate agents and aspiring property owners are interested in getting into real estate investing but don't have the capital to make it happen. That's where real estate investors come into play. A partnership with an investor can provide you the capital for your investment opportunity, in exchange for a share of the profits. To that end, here's a guide on how to find the right real estate investors.
What is a real estate investor?
While investing in real estate is a great way to diversify your portfolio, it's expensive to get into. Not only do the properties themselves cost hundreds of thousands of dollars, but there are also ongoing costs like property taxes and maintenance to consider. So few property investors, especially those just starting out, have the capital needed to start up a real estate investing business. Enter investor partnerships.
As the name suggests, a real estate investor financially backs real estate investment deals. Typically, someone with industry experience, such as a real estate agent or mortgage broker, will seek to partner with a successful investor, who can provide access to the cash they need to be competitive in securing investment opportunities.
How to find real estate investors
Now that you know why someone might want to form a real estate partnership, how do you go about finding real estate investors? Here are several options to help you decide which route might be best for you.
Ask family and friends to invest
First, you can always tap your own network of family and friends. If you're just starting out in the real estate industry, this might be the way to go. A benefit of working with family and friends is that they already know you and your work ethic. When you don't have much other proof of your success, targeting warm leads with whom you already have a relationship can be a way to get your business going.
But mixing business and personal relationships can get tricky. If you do go this route, try to keep things professional. For example, you'll want to do a formal presentation when asking for their investment. If they agree, it's also a good idea to sign a legally binding agreement that outlines the terms of your investing relationship.
Find a local real estate investment club
You calso can consider real estate investment clubs, which help you network with others interested in investing in real estate in your local market. Joining one may give you the opportunity to connect with a private investor who can provide the funds to tackle your next real estate deal. If you're new to real estate, you might also be able to connect with an experienced investor to mentor you.
To find an investment club in your area, most of the time, all it takes is a quick Google search. However, you could also try looking on networking platforms like Meetup or connecting with other industry professionals through your local Chamber of Commerce.
In many areas, other private investing clubs do exist. Usually, though, these clubs are not publicly advertised. It may take a little bit of time and a lot of networking before you're asked to become part of such an investment club. But if you can get your foot in the door, membership often leads to a plethora of opportunities.
These days, the internet has made it much easier to find people willing to invest in your real estate deal. You can do so through crowdfunding, which essentially allows you to use a digital platform to connect with investors looking for opportunities to generate passive income. Through crowdfunding, interested investors will contribute money to your investment opportunity. In return, they're entitled to a share of your profits.
If you're considering crowdfunding, the first step is choosing the right platform. Ideally, you'll want one that vets all its investors, as well as one that offers advertising opportunities for your crowdfunding project.
In addition, if you do decide to go this route, it may take some time to gather the amount of funding you need. Since crowdfunding allows multiple investors to each contribute a small amount of money to the project, it may take longer to reach your fundraising goal than working with a few investors who each contributed a greater percentage of the funds.
Stay active on social media
Lastly, you may be able to find social media groups targeted to real estate investors. Similar to real estate investing clubs, these groups help you network and facilitate connections so you can find a real estate partner. Your goal: Be active in the conversation. Ask questions of more experienced investors and comment on other people's posts.
If you're unsure of where to start, Facebook (NASDAQ: FB) and LinkedIn (NYSE: LNKD) are probably the two social networks most helpful in facilitating partnerships. In particular, LinkedIn is a good bet because those interested in forming a real estate partnership can see your experience on your profile.
Tips for building effective partnerships
Once you have a potential partnership in mind, it's up to you to pitch the idea of working together, so make sure you're prepared when the opportunity comes. Here are a few tips to help ensure you're ready to impress.
Prepare important documents in advance
It's not enough to just have a great idea for a potential investment opportunity. Most experienced investors want to see you have the credentials and experience to be a solid real estate partner. After all, very few people will want to put up their money if they haven't been assured the investment makes financial sense.
In light of that, prepare documents before making any formal presentations. In particular, make sure you have a real estate investing business plan ready, as well as a resume containing any relevant experience.
Practice your pitch
Once you've got those documents ready to go, it's time to craft the perfect pitch. Your pitch should provide an overview of who you are, your unique experience, and how the investor can benefit from forming a partnership with you.
Effective pitches are short and to the point but tell a complete story, so practice your pitch until it's perfect. Consider practicing in front of a mirror and, when you're ready, asking family and friends for feedback. You should only try it out on actual investors once you feel truly comfortable with both your content and delivery.
Be open about potential investment opportunities
When you're looking for a partner, you need to be open about any potential investment opportunities that come your way. You can't keep them to yourself for fear someone will scoop the deal from you. After all, investors are drawn to opportunity. If you put a deal out there, it will probably pique someone's interest and they'll want to work with you.
If you find a great opportunity in your local market, make it known. While you don't necessarily have to post about it on one of your social media groups for everyone to see, share this information with a few connections you trust. You never know what kind of relationships you'll end up forming from a single hot tip.
Don't give up, but don't settle either
Part of finding a real estate partner is knowing when to persevere. Odds are you probably won't nail your very first real estate investment pitch. However, don't give up after your first try. Instead, try to keep making connections. It may take a few attempts, but eventually you'll find someone interested in what you have to offer.
You don't want to settle for just any real estate partnership, either. Ideally, you'll find someone with experience and skills to complement your own, as well as someone with whom you're on the same page about your investing strategy. Don't be afraid to keep looking for a partner until you find the right fit.
The bottom line
Finding the right real estate investment partner can be a process. However, if you try a variety of avenues, show up prepared and ready to pitch, and are open about any opportunities you may be aware of, it should only be a matter of time before you find a partner who complements you.
Use this information to help you get started on your journey. With any luck, you'll find your investor in no time.