5 Big Myths Around Raising Finance (& the truths, but only for those prepared to really see)
In the last 15 years, I’ve seen a lot of people in Progressive raise money without: >Prior experience in property >Prior experience raising money >A load of money already behind them.
In fact, prior experience & cash behind you sometimes hinders people More on that later.
But that’s how I started back In Dec 2005. I was in consumer debt, by Feb 2006 I’d done my first ever ‘JV’ with Mark Homer (his money, his experience, my other resources (below) & by the end of 2006 we’d done around 20 deals.
In those 15 years I’ve raised £10s of millions, all from that newbie position back in 2006. Sure, I’ve reinvested profits, bought properties worth £millions for cash but all from profits of, wait for it, no money down deals (none of my own money down).
The myths I have observed when it comes to raising finance, and this comes from experience of both my own journey but more importantly from the huge Progressive community, are:
1. You need money to make money
2. You need to have experience to raise money
3. You shouldn’t raise money from friends & family
4. Raising money is the hardest part of property investing
5. Why would anyone invest in meAdditional point
6. below I shall now address these myths & share the reality (truths) of the proactive, productive community members:
1. You need money to make money If this were the case, how would anyone ever get started? Sure, if invested well, money makes more money, but you can just as easily squander it. Many people new in property with lumps of cash make bad investing decisions & rely too heavily on the money & not on all the other resources available to them (shared in point 6.)All bootstrapped start ups start with (almost) no capital. Lease options require no depositsRent to rent & rent to own require no deposits Angel investing is a concept of the business owner putting in sweat equity, & the investor funding with cash equity: this is a NORMAL type of venture, & also the most common type of JV in property YOU put in the time. They put up the money: both are equally valuable. ALL money; all the money you’ve ever earned, originally came from work, exchanging time for services, & creating VALUE (salary, income, dividends, cashflow, consultancy fees, recurring income & royalties) not just capital.
2. You need to have experience to raise moneyExperience comes with time, & of course it helps, but how do you get to ‘experience’ without inexperience first? Every master was once a disaster & every winner was once a beginner. Do SOME investors only want to deal with people with experience? YESBut all? No. Might you be surprised just how many? YESIn addition to experience, investors are also looking for the following traits: (Before I share these traits, this is exactly how Mark ‘invested in me’ (fronted all the money for our JVs)>Work ethic & time you have to invest >Desire & ability to learn & improve >You doing all the work, admin & management >Other assets you have (transmutable experience in other fields, skills & assets they don’t have)>Willingness & ability to solve problems & deal with challenges & conflict >Trust worthiness & lendability >Contacts & other resources (below in point 6. Also see C.R.E.S.T belowIn fact, often your IN-experience is a plus because they can get a better deal & a bigger share 😉
3. You shouldn’t raise money from friends & family I’ve found this a myth of fear. Fear of it all going wrong. But you could argue you would work even harder & do even more to ensure things worked, BECAUSE it’s your familyMark & I have raised money from parents & uncles, & these deals worked very well. There was trust & commitment. Any deal can go wrong but any deal can be made right too, And if things got hard, your family will be more forgiving than a ruthless Dragon (Vulture). It’s often a good and logical place to start. My Mum was disappointed when I didn’t ask her to lend money into our property deals in the early years.
4. Raising money is the hardest part of property investing Finding great deals I have found far ‘harder’ than raising money. Money is everywhere, great deals are hotly competed for. Money flows to those who value it. Money flows to good deals & returns. People with money have great problems of tax, getting good returns, trusting good people with it, protecting it, so a trusted investor in a great asset like property is a big double win. You will find once the first deal is done & the trust is built, the money will keep flowing.
5. Why would anyone invest in me?Revert to point 2. & the traits other than money people are seeking. I created a model called C.R.E.S.T. The 5 main areas people seek to have covered off in order to invest. Whilst some investors require more than one of these, many have ONE main driver. C. redibilty R. eturn E. xit S. security T. rust Credibility is not just proven track record, but other assets, traits and resources covered in this article. Return is based almost solely on the quality of the DEAL itself. So find good deals.Exit and security are about reducing risk and increasing certainty, and these can be written into an agreement Trust is commonly the most important one, & no ones needs any prior track record to be trustworthy; this is a HUMAN trait. Let me ask you this hypothetical: gun to your head, would you rather:A. Invest your hard earned money with someone experienced you DO NOT trust or B. Someone with less experience who you DO trust The answer is usually more than 80% in favour of B.
6. Things more valuable than money that make you investible:Contacts, resourcefulness, reputation, reach, brand/exposure, creativity, partnerships, willingness to learn & solve problems…These are often more valuable than your proven track record, & will get you far quicker to the money & a proven track record & then you will have it ALL. People with money tend not to leverage these latent resources.
But to finish, you must remember these two things: 1. If you don’t believe in yourself, why should anyone else?2. When people & critics say ‘you can’t’, they really mean ’they don’t know how’ or ’they don’t want you to’.
Anything you would add, share your experience or ask me any Qs, please share in the ‘Progressive Property FB group’ where there’s a great thread running on this:https://www.facebook.com/groups/progressivepropertycommunity/permalink/2001967486612950/
If you are not a member, request entry here first:https://www.facebook.com/groups/progressivepropertycommunit