How to Raise Money the Easy Way for Real Estate
Hey everyone, I have shared a lot of information about real estate investing through these videos, but one element that I always get asked about is how to fund these investments. It is easy to understand the fundamentals of this industry and know what you’re supposed to do, but it may not be quite as easy to get the capital you need to follow your dreams.
Fortunately, funding your real estate dreams is not as hard as it may seem. Today, I’m talking with Chris Naugle, who knows a lot about how to make your financial dreams come true without having to sacrifice yourself in the process.
Chris is a self-made man, having started his own business as a teenager. He was making six figures at a relatively young age, but he was putting in 90-hour weeks, and he wasn’t satisfied. It wasn’t until he got into real estate that he recognized the value of this industry and that passive income was a better way to go.
Chris and I share a lot of financial wisdom in this video, so be sure to check it out. I’m also going to share some of the highlights, as well as discuss the various elements of raising money for real estate so that you can get started right away.
7:00 – Real Estate is a Finance Game
One of the most radical epiphanies that Chris had was when he realized that most of the people he knew in real estate who were living the life he wanted weren’t doing the same thing he was. Chris was spending most of his time finding and flipping houses for a profit. While this method is excellent for getting cash immediately, it is not necessarily the best investment of your time.
Instead, you need to learn how to get your financing in order and, ideally, become the bank. Rather than focusing your time and energy on getting properties and making deals (although that is still critical), most of your attention should be on the financing aspect of this industry. By shifting your perspective there, you can make a bigger difference on your bottom line.
Once Chris realized that fact, it changed the game and he never looked back.
16:06 – Always Be Raising Money
Knowing that financing should be your primary focus is one thing, but going after that money is another. However, you may be able to find investors in places you would never expect.
Personally, I wound up talking with a billionaire outside of the Ritz Carlton on a random day. I was waiting to drop off my car, and I struck up a conversation with a gentleman. It turns out that he had over 100 million that he wanted to invest in real estate. Although I wasn’t looking for financing at that moment, I was able to leverage my experience and my ability to meet people and get access to money that would have otherwise gone to someone else.
Overall, you need to get into get mindset of “always be raising money.” You may not need it immediately, but you never want to let an opportunity go to waste. There’s money out there, particularly right now before the market turns, so take advantage while you can.
16:35 – Use Your 401k as an Investment Tool
You still need to know how to become the bank you need. Realistically, any money you make from a real estate deal, isn’t enough to bankroll someone else.
So, here’s a little secret that we’ve discovered: If you have a 401k account, then that’s going to be your bank.
Don’t scoff at the idea. Here’s how it works: since you’re borrowing from yourself, that interest you have to pay doesn’t go to a third party. Although you have to pay it, it’s still going into your pocket.
So, if you borrow money from your 401k to bankroll someone else’s real estate venture and charge more interest than what you have to pay back, you’ve made money without having to lift a finger.
21:43 – Never Ask for the Money
When trying to get financing for your next real estate venture, you never want to approach someone and say, “Hey, can I borrow X dollars from you?” If you do that, you’ll find that most people will have no interest in giving it to you.
A better approach is to talk about what you do. I recently was on a plane, talking with my neighbor about our work. I told her that I was in real estate investing, helping people leverage their 401k accounts to make about five to six percent interest.
I made it personal and shared a story about the people I work with. Quickly, my neighbor got interested in getting involved and getting a piece of the action. Now, she’s chasing me down to give me money for an investment, rather than the other way around.
Taking that kind of approach will always generate more interest and get you a better return. Don’t focus on the money; focus on the benefits and the value that those investments can bring to the people.
Be sure to check out the rest of the video. Then, go to REIvault to see what we offer. If you’re ready to upgrade your real estate investment portfolio, then join our team of investors and start making the money you deserve.