Raising Private Money to Fund Your Real Estate Deals (Live Q&A)

TL;DR

The best way to raise private money for real estate deals is to start within your own network and build partnerships that benefit both you and your investors. Matt Faircloth recommends looking for people with self-directed IRAs, substantial cash reserves, or equity in real estate owned free and clear. He also explains how to structure and exit private-capital deals while avoiding pitfalls. Read on for practical places to look and ways to approach funding.

Transcript

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Key Insights

• Raising private money is crucial for real estate investors to scale their business and create win-win situations with investors.
• Matt Faircloth emphasizes the importance of leveraging personal networks to find private money sources, rather than relying on unknown external sources.
• Self-directed IRAs are valuable tools for investing in real estate, allowing individuals to direct their retirement funds into real estate ventures.
• Real estate owned free and clear can be leveraged through home equity lines of credit, providing a bank account-like resource for investments.
• The book 'Raising Private Capital' provides comprehensive guidance on structuring deals, finding capital, and avoiding pitfalls in private money transactions.
• Faircloth encourages using BiggerPockets resources, including webinars and podcasts, to gain deeper insights into real estate investing strategies.
• The discussion highlights the potential of converting untapped equity in personal networks into investment capital for real estate projects.
• Faircloth's approach is geared towards both novice and seasoned investors, offering strategies to either start or refine their private money raising skills.

Questions & Answers

Q: How can you raise private money to fund real estate deals?

Start by looking within your own network for people who have money or accessible assets and may want to invest. Faircloth recommends creating a partnership in which investors can earn on their money while you use the capital to build your real estate business.

Q: Where should real estate investors look for private money?

Faircloth says private money is not hiding in a secret place and that investors must hustle to find it within their own networks. Potential sources include people with self-directed IRAs, substantial cash reserves, or real estate owned free and clear.

Q: What terms should investors expect from outside private-money companies?

Faircloth warns against expecting a company to offer private money at 6% interest with no personal guarantee, no points, and repayment only at the end. He says that kind of arrangement does not exist and instead recommends using your own money or partnering with someone who has capital.

Q: How does a private-capital partnership create a win-win situation?

The capital provider can earn a return from the money invested in a real estate project. At the same time, the real estate operator gains funding that can help build and scale the business.

Q: How can self-directed IRAs support real estate investing?

A self-directed IRA can allow its owner to direct retirement funds into investments such as real estate. Within a private-money arrangement, those funds may be used to lend money for a project while giving the account owner an opportunity to earn a return.

Q: How can equity in real estate become a source of private money?

People in your network may own real estate free and clear but have substantial equity sitting unused. Faircloth discusses accessing that equity through a home equity line of credit so it can fund real estate projects through a lending or partnership arrangement.

Q: What does Matt Faircloth cover in Raising Private Capital?

The book covers how to find private capital, structure deals, exit those deals, and avoid common pitfalls. Faircloth says it ranges from raising a first dollar of private money to completing fairly complicated deals.

Q: Who can benefit from Matt Faircloth’s private-money guidance?

The guidance is intended both for people getting started in real estate and for seasoned investors. It can help investors who have completed a few deals begin raising private money, while also helping experienced investors sharpen their approach.

Summary & Key Takeaways

• Matt Faircloth discusses the importance of raising private money for real estate investments, emphasizing the use of personal networks to find potential investors. He introduces self-directed IRAs as a tool for real estate investment and highlights the value of untapped home equity.

• The conversation covers strategies for identifying potential investors within one's network, such as those with free and clear real estate or substantial cash reserves. Faircloth also introduces his book 'Raising Private Capital' as a comprehensive guide for structuring deals and accessing private money.

• Faircloth encourages participation in BiggerPockets webinars and podcasts to gain further insights and education on real estate investing. He also discusses the benefits of using BiggerPockets resources to enhance one's knowledge and skills in raising private capital.