How to put deals together and how to raise money from sponsors is the back bone of the multi-family apartment business. But putting up deals is not as easy as it seems. For one, it will not be an automatic process once you step inside the game of real estate. In the business, you must not only be good with the numbers, but you have to build some credibility for yourself. It starts with you and building your mindset.
If you’re just starting in this game, you may not have a lot of net worth. But don’t fret about it. If you don’t have a lot of net worth in the beginning, it is highly encouraged that you look for people who do have net worth and become partners with them. Partner with someone that can fund you and bring in their credibility piece. We call that a sponsor. You want a sponsor for your deal.
Usually that sponsor is required to put down the earnest money initially and then provide his net worth. For you to see the whole picture, here’s what I did in the beginning. When I first started out, I was willing to give about 10% of my deal for what I call sponsor. If I’m creating a PPM, a private placement memorandum and I need someone to put up earnest money and to show net worth, basically help sign for the loan, that person’s usually going to get that 10% carve out of the sponsorship ownership.
The question is: How do you find sponsors? Well, for starters, you simply just start asking your friends and your family. If you’re new in the business, start there and practice. Start with your immediate social circle and practice asking. Because then, the questions will come, and you will have to give a good response to what you’re doing and why they should do it. Prepare your credibility kit because you will be needing this as you go along.
Building your legitimacy and consistency in the business can become a game changer in your career. As you build your track record, by holding deals, all these pieces come together one by one. People will soon come to notice your potential and you become this person who orchestrates the whole concept. Little by little, you start not to give up that much. In the beginning, I also had to give up a lot. There was a time when I was paying almost 20% or more for capital. But now, I don’t do that anymore. Why? Because I’ve developed a track record. This is a slow, but a sure-fire key on how to lower your cost of capital.
Another important thing to remember is, if you have no credibility, no money, and you find a deal, and a sponsor, and maybe even find someone that has all the money you’ve got to be willing to give up more than you wanted. In the beginning, most people are not willing to do this but I’m telling you right now, you have to be willing. Most people get too greedy and end up never doing a deal. Honestly, it is more important to start doing deals even if you get a smaller percentage. Who cares? Stop playing this game of “I gotta have. I gotta have.” Get into reality saying, “I am. I’m doing real estate.” Because your next deal doesn’t have to go that way.
The golden rule is we take care of the capital 100%, all the time, no matter what. You must live by that rule. If you will follow that principle, it pays itself off in spades. By doing what you say you’re going to do, you’re going to attract sponsors. Finding capital is much valuable than looking for a deal. It is the best way to get the alliance share portion in any deal. If you really want to get into the multi-family space, start by learning how to raise capital. And learn how to be good in gaining it. You can find people other people to bring deals.
So, remember, life is a journey. You start at one place and you end up in another. Sometimes it takes you a small amount of time. Sometimes it takes a lot longer. Regardless of the time that it takes, more importantly is how you’ve set your mind that it doesn’t matter because it is the journey. The journey is the reward in this business. It is the time that you get to spend and cultivate with your friends and family, and your loved ones, and then doing the thing called real estate. Doing the thing that you love and making sure that you love it for all the right reasons. Don’t hate what you love, love what you do and then still put limits and borders on to protect your family, to protect your loved ones because you can get consumed by this, by anything.
Don’t let that be you. Let the journey be the reward. Do the hard things that are hard to do and yet you know you must do them. That is just the process of life, the Kahuna way of life
Interested? Check out these links:
A free live webinar this February 20, 2018 about what I’m doing in the multi-family space. To register, go to webinar.kahunawb.com/welina. We’re going to take up to 500 people on this webinar, so don’t miss out on that opportunity.
Watch out for The Boardroom. I will be teaching about apartments with a small select group of 35 people.
Don’t forget to download my Free Workshop Quickstart Video Series, and if you like what you have heard please leave a review on iTunes.
Text the word MONEY to 408-500-1127 to get my free private money program and credibility kit for single family.
