- Pitching your deal is kind of like dating
- Keep your audience in mind
- Make it exciting
- Outline the financial benefits
- Address any challenges or hurdles
- Why you and your deal
- Ask for action
Real estate investing requires a lot of capital. If you intend to pursue bigger projects, you will need to leverage your network, get a loan from a non-traditional source, get approval for plans from a local municipality, or structure a joint venture to make a deal work. This article is to help you secure money or partners for your deal.
When I first started investing in real estate, I pooled some money with a couple of family members and we started buying houses to fix and flip. We weren’t using any leverage, just our pooled funds. It didn’t take long before all of our cash was tied up in houses. We found ourselves with incomplete rehabs unable to finish because we were out of cash. We had to let deals pass us by because we didn’t have the funds to make any more purchases. Our checks started bouncing from insufficient funds. We needed more money to keep the wheels turning.
I remember not having any money left over in my personal account because all the cash I had was invested. I knew we could do so many more deals if we found some private capital to give us a boost. And I knew I had good deals that would be attractive for money sources. Soon I was able to connect with several private lenders who gave us a line of credit on each house. We were back in business once again!
Since then, I’ve really enjoyed finding and building relationships with equity partners, lenders, and structuring joint ventures for my investment deals. It’s similar to finding a new real estate deal except a new money source can last much longer than a single deal. I’ve had the good fortune of pitching my own deals as a principle and pitching deals on behalf of other investors as the broker. So I’ve been able to see what gets investors to respond. Through my experience, I’ve picked up a few strategies I’d like to share with you.
Start with this in mind: pitching your real estate deal is kind of like dating. It has to be smooth and finessed. It can’t be forced. You can’t come off too strong or make yourself seem desperate in any way. You can’t make it all about you. Because if you’re looking for money for your deal, it is absolutely not all about you. It’s about the other person; their wants and needs. Only after their wants and needs are met can you mention what’s in it for you. If they’re not interested, you can’t freak out and get upset. Instead, take time to reflect on what you’re bringing to the table.
The deal has to be a good fit for both sides. In this case, money is like love and affection. There is love and affection out there that you’re better off without. There will be money that wants to be involved in your deal but if it comes with baggage or strings attached, you’re better off taking a pass.
Next: Keep your audience in mind. You can become a master dealmaker if you remember to keep your audience in mind. I hear too many pitches where the investor makes it all about himself. That’s a fast track to getting nowhere. Craft your pitch to your audience. Tell your audience what’s in it for them. Highlight how they gain, how they benefit, and the results they will get from participating in your venture. During this phase, it’s not about you. It’s all about them.
Third: Highlight any special or exciting features of your deal. This should be emotional or psychological. Investors want to be a part of something special, exclusive or prestigious just like anyone else. You’re selling emotion then you will justify it with logic. Make this segment of your pitch exciting. It should sound something like this:
“This market is on fire and we’re getting in at the perfect time!”
“This is pure mailbox money, you won’t have to lift a finger!”
“We’re stepping into so much equity this deal is money in the bank!”
“The seller is so motivated he’s practically giving this place away!”
“We’ve got support from the city and they’re going to ensure this project succeeds!”
See what I mean? You want to make your investment deal exciting. Don’t overdo it. It needs to be based in truth. If you exaggerate, you’re going to lose your credibility. You need to make it exciting enough to hold interest and make investors feel special for being a part of it.
Next: Highlight the financial benefits of your deal. Now that you have your audience excited, justify your claims with facts. This part of your pitch is where you provide the proof. Speak to the facts of your deal. Be as specific as possible when you’re discussing investment performance, tax benefits, holding time, and profit potential. You want to speak to the level or risk of the deal and how the return on investment will be achieved.
Fifth: Speak to any challenges, defects, risks, or hurdles associated with your deal. Once you cover the upside, you have to address any potential downside or risk. I’ve found that this segment of your pitch adds a lot of credibility to your deal. It shows you’ve done your homework, you know the risks, and you recognize shortcomings and underperformance happens. This is what makes your deal real. You’re not pitching something that’s perfect. If that were the case, you wouldn’t need any support, the money would find you. You’re pitching an entrepreneurial venture and that entails risk and reward.
Then: Highlight what makes you credible for making this deal succeed. You should inspire confidence throughout your pitch. This segment is for you to highlight specifically what makes you and your deal worth investing in. It could be subtle or straightforward.
If you’re putting together a debt fund like I have it could sound like this: “I have completed over 100 distressed asset transactions in the target market and I am an expert underwriting risk on hard money loans.” Or if you’re pitching an apartment syndication it could sound like this: “I have been involved in over $70 MM in apartment acquisitions in the Western region and I know the ins and outs of the multifamily market.”
It could be as simple as knowing the fine details of your deal. Anticipating questions, providing quality responses, and inspiring confidence that you know what you’re doing. This is all leading up to the final segment…
Last: Ask for action and / or commitment of interest. Here’s the final question to ask: What do you need from me to feel comfortable moving forward with this deal? If you’ve done everything as I’ve outlined so far, you won’t have any trouble getting interest from investors. If you hear crickets during this final step there’s two probable reasons. One, you didn’t pitch to the right audience or two, you don’t have a good deal.
Pitching your investment deal is a discovery process. You need to identify what investors want to invest in, find that opportunity, then structure it to work for everyone. I learned this through my own trial and error. An early deal that I pitched to investors was for a complete rehab of a 12 unit apartment. I was given credit for sourcing the deal and structuring the seller financing terms, but I was never able to secure the required equity and financing to make the deal work. Part of the reason was because I was in way over my head. I didn’t realize it at the time but I did not have the experience to take on such a project. The risk and reward was not worth it for investors. If I knew then what I know now, I’d have investors lined out the door. That’s the entrepreneurial process.
In conclusion: You will have anywhere from 30 seconds to 5 minutes to make a pitch to investors. You’re going to lose interest and attention if it takes you longer than that. An investment pitch must be suited to take place over the phone, at a zoom conference, at lunch, or at an industry event.
In addition to your pitch, provide interested investors with a marketing package that gives more details of the items we’ve gone over. If you want to head up big real estate investments, you need to be comfortable pitching your deal. This takes a combination of art, science, and practice. You can master your pitch. You’re just one deal away!
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