Often lack of money is the “excuse” for not getting started in property investing.
But imagine having a never ending pot of money to invest in your own property deals without needing a bank!
Not only is this possible, it’s happening everyday in the property world and there’s no reason why you too shouldn’t be doing the same.
In this article I’m going to give you some tips and tricks to help you understand the different investor types, who the best investors are to work with, how to find them and why they would choose to invest with you!
We’ll cover different types of property investor in a little bit but to try and keep things as “top level” as possible, we would consider a property investor to be:
“Someone who wishes to benefit financially from property”
This might be someone who wishes to purchase property themselves, control property without owning (i.e. the rent to rent strategy) or even someone who wants a return on their capital via lending it to invest in property.
Yes, this is a very generic definition and we’ll come on to a little bit more detail in a second, but hopefully it’s one that opens your mind to the possibilities of working with others on your own property journey.
The obvious reason is money of course. The investor has money, you need money, so working together makes sense as long as the terms are favourable for all parties involved.
But what about experience?
There are plenty of property investors out there who have LOTS of experience but who are now looking for a more “hands off” approach to leveraging their capital.
This means not only will they be lending you the money, but they’ll also be helping you gain experience!
You might even consider teaming up with an investor just for the experience they can bring to the table!
You may also have heard about the service of finding property deals for investors and charging a fee for doing so – often referred to as deal packaging or property trading.
For a successful, sustainable deal packaging business you will need to work with investors so it’s important for you to learn how to find them, qualify them and even manage them throughout the process.
Your chosen property “path” will determine the type of investor you want to work with so let’s cover those off now.
Let’s start with the different types of property investor.
You might have heard the terms “sophisticated” and “non-sophisticated” investors? If you haven’t, you will do at some point so here’s a quick couple of definitions:
“A sophisticated investor is a classification of investor indicating someone who has sufficient capital, experience and net worth to engage in more advanced types of investment opportunities” – Investopedia.com
“Anyone who fails to meet the FCA income or net worth requirements for sophisticated investors”
I’m not going to spend any time on the Sophisticated investor side of things in this article as the likelihood is you won’t have the experience and/or confidence to deal with them and what we want to give you right now is the confidence to find your first investor!
So, let’s give you a quick overview of the more common investor / investment types you should be looking for before going into a little bit more detail about how to find them:
This can be immediate family – parents, grandparents, uncles, aunties, cousins, siblings, etc. It could also include friends, work colleagues or even referrals from those closest to you.
Whilst friends, family and network referrals might fall into this category, I’m talking about going out and finding people who have money (i.e. inheritance, savings, redundancy, etc.) who would like their money to work harder for them.
RELATED: Questions to Ask Property Investors
There are many property crowdfunding platforms available now (including Crowd Property, Blend Network, Sourced Capital). These platforms allow you to seek funding from multiple investors all from one place. Each investor gets a small share in the deal whilst you get funding
Of course, each of the different types of investor come with their own pros and cons.
It is often said that you shouldn’t go into business or borrow money from friends and family in case it goes wrong. I don’t necessarily agree with this, however I do understand there are risks involved and so should you.
But why wouldn’t the person just go out and do it themselves if it’s so beneficial.
Usually there are 2 reasons:
LACK OF TIME
A lot of people just don’t have the time needed to go out and find, analyse, negotiate, and complete property deals.
Investors are only too happy to have someone like you to go out and do all the legwork and them to get a nice return on their money without having to lift a finger.
LACK OF KNOWLEDGE / CONFIDENCE
You would be surprised at how many people still don’t understand the benefits of investing in property. This lack of knowledge means they are unaware of just how much better their money could be working for them.
Your responsibility is to open their eyes to the benefits of investing in property and then offer a hands free solution so they benefit from the gains whilst you can build your property portfolio.
Right, let’s move on to how to find property investors.
You have a couple of things to consider here, one much easier (and quicker) than the other.
PROPERTY INVESTORS ARE CLOSER THAN YOU THINK
I want you to just have a quick think about who you already know that might fall into one of the “property investor profiles” above?
We usually all know at least one person in our family/friends network who invests in property.
Would they be interested in investing with you?
I can sense every fibre of your being tightening with the thought of asking friends/family for money, but that’s where you need to change your thought process.
We’re offering a return that that person isn’t currently getting on their money, whether that’s with a bank or other “traditional” savings method.
The easiest (and quickest) way to find property investors to work with is always going to be your existing network.
They know you, they like you and hopefully they trust you which are the 3 requirements for any successful property investor relationship.
NO ONE IN YOUR CURRENT NETWORK…WHERE NEXT?
Ok, so you’ve exhausted your existing network to no avail (or you’re too shy/nervous to ask 😉), where next?
The traditional “go to” place for those first starting out tends to be property networking events with PIN meetings being one of the longest running and most popular, although there are usually plenty to choose from.
I have a divided opinion on property networking events.
On one hand, they’re great for meeting people in your local area interested in property investing and on a similar journey to you.
However, on the other hand they are usually attended by others who are relatively new to property which means they might not necessarily be the right place to find investors looking to invest passively (remember our investor types from earlier).
I’m certainly not advising against property networking events, as they will play their part on your property journey and you will meet some fantastic people but I’m not convinced they’re the best place to find investors.
There are tens of thousands of “investors” on social media. You only need to join a couple of the more popular Facebook groups and you’ll see what I mean.
Your job is to find the “needle in the haystack”, the quality investors aligned with what you’re looking to achieve.
Remember our investor types. A lot of the more “visible” investors on social media will fall into the “Inexperienced” and “Active” categories, which generally aren’t the type of investors you’re looking for when seeking funds or to package deals for.
I’m not saying they’re not on social media.
What I am saying however, is that you’re going to need to work a little harder than just posting saying “looking for investors in the x area”.
I’ll come onto relationship building in a minute, but just keep what I’ve just said in your head for a bit. You’ll understand why in a bit.
Now we’re starting to move on to some of my favourite ways to find property investors.
Technology has made this method so much easier than it used to be to hold events. It has also allowed anyone in the world to host and attend events and build a truly global network.
To make your online property investor event hugely successful you need to be able to offer attendees massive value.
But what can you offer that’s valuable to investors?
Local knowledge and a detailed explanation of exactly how your service works for those investors who qualify to work with you.
Trust me, just by offering an event like this will set you apart from the majority!
Another marvel of modern technology is the ability to set up paid ads on platforms like Google and Facebook which allow you to target extremely specific audiences.
You can set up an ad which gets people to fill in an investor questionnaire. You then go through their details and get in touch with them to discuss things further should they meet your criteria.
Paid advertising can also be used to get people to register and attend your property investor events!
Now that we’ve covered a few ways to find property investors, let’s address a couple of the doubts we have traditionally come across with our students.
Relationships are key when working with investors, and relationships take time to build.
Even if you’re looking at asking those closest to you to invest with you, you need to secure their confidence and belief in you.
This means you need to be patient and don’t just “go for the jugular”.
Explain the benefits of what you are looking to do.
Explain the risks and how you plan to mitigate against them.
Explain how you plan to give security for the money they lend (i.e. charges on the property).
You need to ensure that they are fully aware of what they are getting themselves into and that they are confident to proceed on that basis.
Hopefully, you are now feeling a lot more confident with regards to funding your property deals without the need for large sums of your own money.
We’ve covered asking those closest to you first (as awkward as it might seem initially) and then working out to finding investors from lead generation tactics like events and paid advertising.
But the most important thing I want you to consider is the importance of taking your time, building relationships, and ensuring you don’t get into agreements with the wrong type of person.
There are so many stories of bad experiences with investors, but these usually stem from not choosing the right people to work with from the very beginning.
Take your time, align yourself with the right people and you’ll hopefully have a long and happy property investing life ahead of you.