There are lots of people who are looking for a passive income after quitting their job or looking for means by which they can sustain their children. However, they may be faced with the challenges of not having enough capital to start the project; the easiest way is to raise money from private investors to fund the project.
The main reason is that convincing private investors to invest in your business shows that you have a good project and such money would be managed properly as against using your own money to set up the business. Other benefits which can be derived from raising money from private investors include:
1. Having Enough Money for Business:
If you raise money from private investors, there is no limit to the number of deals which you can execute because enough cash would be available as against using your own money alone. You can then use such money to accumulate properties which would facilitate your business activities. It is however essential to have a good ability to raise money because it would determine how successful the business would be.
2. Having Good Control over The Money:
Whenever you are using your own money, it can be mismanaged without anyone asking you but when using money which is gotten from private investors, you have to manage it properly because they would also be monitoring the money.
How To Raise Money For Your First Multi-Unit Apartment Building
It is essential for you to have a sample deal package which contains all the necessary information about your potential deal. The deal package would be presented to the potential investors as well as other professionals whom you want to recruit to your team. You can also lower the price in your sample deal package so that you will be able to convince potential investors. When the potential investors are approached with a deal package which looks like the real deal, you would be able to convince them and it would also serve many benefits, some of which include:
Allowing you to visualize your project in a better way
It would allow you to have a better conversation with your potential investors
You will also be able to get a financial commitment from your investors
How To Create Your Deal Package
1. The first step involve getting a marketing package of a building for sale, the building should have a good marketing package that would facilitate your business and should be of the same size with what you intend to have. In addition to that there are free website which can be used to make deal package so as to make things easier for you.
2. Once you have gotten your marketing package, you have to create a financial projection. This would contain the financial projection of the business for a minimum duration of five years and in some cases, it can be up to 10 years. The reason for this is because the investors should be committed for at least duration of 5 years. It must also be design to include a return which would be appropriate for the investors while settling yourself at the same time.
3. This is where the sample deal which has been mentioned earlier would be created and it should contain:
- Executive summary
- Payment information
- Projected financials and returns
- About the management team
Finding Your Potential Investors
There is need for you to inform everyone around you so that you will be able to find people who will invest in your business, you have to meet those that are close to you and inform them that you have a project and you would want them to invest in the project. Ensure you tell them it is a multi-family investment and the return per annum is quite good so that they would be convinced. If an individual shows interest, make sure you inform him or her about the progress of the project and ask if there are other friends of such individual who can also invest.
Who To Deal With And Who To Avoid
There are different kinds of investors, the sophisticated investors and family and friends. There is need for you to know the appropriate one to deal with so that you would not run at a loss. The sophisticated investors are the big firms which have a huge capital and can deal with many people at a time but they usually request for higher profit, monitor the business and take the asset in case of liquidity which makes them inappropriate for smaller business. On the other hand family and friend would also invest based on the trust they have in you and they would only be concerned with yearly returns rather than monitoring the business, this makes them a good choice and when dealing with them ensure you do not use terminologies which would confuse them, ensure everything is simplify because they might not be professionals in the business.
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