When I’m at real estate networking events many people tell me their biggest problem is lack of capital. Whether it’s to get started or to move up to larger properties there are ways to remedy this issue.
At the time of this post I’m renovating my latest acquisition and while in town I dipped in on a local networking event a friend was hosting. The meeting revolved around raising capital.
Two Ways to Raise Capital for Real Estate Investing
1.) Private Investment – Clean and Simple
Whether you think so or not there are people in your network that have money to invest. It could be a family member a friend or even an old coworker.
The best part of having someone in your direct network invest is it’s the simplest route. Generally you can just do a promissory note that spells out the terms.
Party A provides funds in return for Party B’s promise to pay a specific sum. You can work out whatever terms are acceptable to you and the investor.
Be sure to check the legal aspect as doing more than a few promissory per year can be considered issuing securities.
2.) Syndication – Think Crowdfunding
The short explanation of syndication is the act of having a sponsor (the one raising money) and a group of investors.
Syndication offers a way to raise much more money than doing a private investment however this is considered a security thus you have to be on the right side of the Securities and Exchange commission (SEC) rules.
Getting into all the details of syndication is beyond the scope of this post so do some research and if you are looking to implement either of these strategies be sure to consult your lawyer.
That’s it for this one as I want to get back into renovation work with my team.
Lead by example!