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If The Deal's Good Enough, The Money Will Come...Or Will It?
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When you've been around the property development space as long as I have, then one thing's for certain - you'll have heard the phrase "if the deal's good enough, the money will come", or something similar, more times than you can poke a stick at.
The idea is that when you find a cracker of a deal, money partners will suddenly come swarming out of nowhere with big wads of cash in their hands, wanting to get in on the action. And while I certainly agree that investors will definitely want to get involved if the numbers for your deal stack up, it's time for a reality check - they don't magically appear...
But I have good news - it's possible to create a situation where you CAN wave the equivalent of a magic wand and have money partners appear for your deals.
The idea is that when you find a cracker of a deal, money partners will suddenly come swarming out of nowhere with big wads of cash in their hands, wanting to get in on the action. And while I certainly agree that investors will definitely want to get involved if the numbers for your deal stack up, it's time for a reality check - they don't magically appear...
But I have good news - it's possible to create a situation where you CAN wave the equivalent of a magic wand and have money partners appear for your deals.
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To start, let's take a step back and think about what's involved in getting a money partner involved in your deal. Depending on the size and complexity of the deal, you and your money partner are going to be working together for anything from a few months to many years. I've sometimes likened it to a marriage, and I'm not entirely joking!
Generally, you're also talking about fairly substantial amounts of money, particularly if the deal is in one of the eastern seaboard cities.
Given both those factors - time and money - pretend you're a potential money partner and think about who you'd want to invest with. Somebody you know well, have a good relationship with and trust? Or a complete stranger?
I'm guessing most of you answered option 1 - someone you know, like and trust. So I'm going to wave the equivalent of a magic wand by pulling my phone out of my pocket. Because guess what's in the contacts list in your phone? A stack of people who all know, like and trust you. At least I hope they do!
Generally, you're also talking about fairly substantial amounts of money, particularly if the deal is in one of the eastern seaboard cities.
Given both those factors - time and money - pretend you're a potential money partner and think about who you'd want to invest with. Somebody you know well, have a good relationship with and trust? Or a complete stranger?
I'm guessing most of you answered option 1 - someone you know, like and trust. So I'm going to wave the equivalent of a magic wand by pulling my phone out of my pocket. Because guess what's in the contacts list in your phone? A stack of people who all know, like and trust you. At least I hope they do!
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But before you start calling them one by one to ask them for money, STOP!
If you do that, you'll suddenly find that a lot of them will run for the nearest hills. What you need to do is spend time building interest. And the time to do that is long before you have a deal that needs funding.
Essentially, you need to start telling everyone you know what you're doing. Having a barbeque with all your mates over, and one of them asks what you've been up to lately? Tell him you've signed up for a property development course. A co-worker asks what your plans are for the weekend? Say you're going to some open homes and an auction, looking at potential property development sites.
You're going to get two possible reactions. First, the person's eyes will glaze over, and they'll rapidly change the subject. These are people I can almost guarantee will NEVER want to be money partners in a project. Make a mental note of their lack of interest, and strike them off your list.
But if the person starts showing an interest by asking questions, talk to them. Tell them what you're doing. Whenever it seems appropriate, keep them updated on how your learning is going, or other things you've been doing in your property development journey. Share success stories, even if they're deals done by other people. Keep whetting their appetite. If you do it in a casual, non-threatening way, then one day you will almost certainly hear the magical sentence "it sounds great - how do I get involved?" And now you have a potential money partner.
Over time, you'll collect a number of these contacts, which means that when a deal stacks up and you're ready to move - magic wand time! Get in touch with all the people on your list, and you're up and running. I know, I know, building up that list of money partners from your existing contacts is going to take time and effort. But it's worth it!
If you do that, you'll suddenly find that a lot of them will run for the nearest hills. What you need to do is spend time building interest. And the time to do that is long before you have a deal that needs funding.
Essentially, you need to start telling everyone you know what you're doing. Having a barbeque with all your mates over, and one of them asks what you've been up to lately? Tell him you've signed up for a property development course. A co-worker asks what your plans are for the weekend? Say you're going to some open homes and an auction, looking at potential property development sites.
You're going to get two possible reactions. First, the person's eyes will glaze over, and they'll rapidly change the subject. These are people I can almost guarantee will NEVER want to be money partners in a project. Make a mental note of their lack of interest, and strike them off your list.
But if the person starts showing an interest by asking questions, talk to them. Tell them what you're doing. Whenever it seems appropriate, keep them updated on how your learning is going, or other things you've been doing in your property development journey. Share success stories, even if they're deals done by other people. Keep whetting their appetite. If you do it in a casual, non-threatening way, then one day you will almost certainly hear the magical sentence "it sounds great - how do I get involved?" And now you have a potential money partner.
Over time, you'll collect a number of these contacts, which means that when a deal stacks up and you're ready to move - magic wand time! Get in touch with all the people on your list, and you're up and running. I know, I know, building up that list of money partners from your existing contacts is going to take time and effort. But it's worth it!
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Sometimes, though, you have a cracker of a deal, and either you haven't built your list yet or none of your contacts are in a position to take action right now. At that point you will need to reach out and find a money partner you don't even know yet. While it may not be preferable to work with strangers, I've seen plenty of partnerships start out that way which resulted in extremely successful deals. So don't discount it as an option.
If you need to find a money partner you don't currently know, then it's vital you present both yourself and your deal in a professional manner. This includes:
You should also do all those things for money partners you already know!
If you need to find a money partner you don't currently know, then it's vital you present both yourself and your deal in a professional manner. This includes:
- Make sure you've done your due diligence
- Have a feasibility with numbers as accurate as possible
- Document everything in an Information Memorandum
- Sit down with the potential partner and talk through every possibility, good and bad, and decide how to deal with each one
- Be ready to pay for the necessary legal paperwork
You should also do all those things for money partners you already know!
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And the next question I know you're about to ask - where do you find strangers willing to invest in a deal? The answer is simple - networking! Find places where investors hang out and join them. Most capital cities have a number of different meetup groups for property investors, and there are certainly various groups on Facebook you can join.
At the risk of blowing my own trumpet, attending the Property Developer Network Meetups is a great way to meet potential investors. There's also our Property Developer Network Facebook group for meeting other people interested in property development, and our ‘sister’ group Development Site Deal Hub, where you can post off market deals if you're looking for money partners.
And remember - a stranger is simply a friend you haven't met yet. So get started on building your list of potential money partners as soon as possible. That way, when the time comes to wave your magic wand and have money partners appear, you'll have plenty available to work with.
At the risk of blowing my own trumpet, attending the Property Developer Network Meetups is a great way to meet potential investors. There's also our Property Developer Network Facebook group for meeting other people interested in property development, and our ‘sister’ group Development Site Deal Hub, where you can post off market deals if you're looking for money partners.
And remember - a stranger is simply a friend you haven't met yet. So get started on building your list of potential money partners as soon as possible. That way, when the time comes to wave your magic wand and have money partners appear, you'll have plenty available to work with.
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