Adam writes: My question is two-fold. I have an innate ability to find and negotiate deals with my team however, I do not have the capital or the experience to come in as an equity partner. Being that I can find deals that are lucrative for investors and their strategies, how can I come into the deals as an equity partner and how can I most effectively pitch that to investors when I do not have an established relationship or track record?
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Welcome to the real investing show with Tim Herriage each day, we’ll provide real investing for everyday investors. Tim is a nationally recognized real estate investing expert podcast, host and public speaker. He built his businesses from the ground up and is here to help you do the same. Here is your host Tim Herriage.
Welcome back to the real investing show. I’m Tim Herriage, appreciate you stopping back by today. Adam writes, my question is twofold. I have an innate ability to find and negotiate deals with my team. However, I do not have the capital or the experience to come in as an equity part, being that I can find deals that are lucrative for investors and their strategies. How can I come into deals as an equity partner? And how can I most effectively pitch that to investors? When I do not have an established relationship or track record, I feel you, Adam, um, a lot of investors find themselves where you’re at and I don’t know you from Adam. Sorry had to go there. I don’t know who you are, but I know where you are. Cause I was there too. If you’re finding these good deals right now, you’re probably wholesaling.
You’re probably, uh, you know, moving ’em out for a fee. You mentioned your team, so you probably have some overhead. I think you go back and listen to the uncontested investing podcast episode with Zach Coppinger juror Z did a wonderful job talking about living below his means. And if you really listen, Mike Hambright, Zach Coppinger all these successful investors that are self made. They get where they want be by living below their means. So I guess my challenge to you not knowing where you’re at is what I, so where I sit today, 21 years in the business, if I had kept one more house per year, one more house per year, you are looking at a net worth difference of 10 million. I’m telling you it is amazing the power of patient. So Adam, I’m gonna, I’m gonna make some assumptions here. Just tell you, you’ve gotta look at your personal expenditures.
You’ve gotta look at your family set up. You’ve gotta make sure that everybody’s is in, is on board with the same goal. Everybody wants to sacrifice now a little bit to really live the great life later. And you know, if not, I mean, this just sounds awful, but maybe you don’t really want the long term play now. That’s that? Now having, being able to attract part, uh, people to let you get in the deal as an equity partner, um, I’m guessing you don’t mean equity partner, the way people use it as in like to invest, you mean equity is in to keep a piece of the deal. I think you have to document your track record, right? I think you have to document what you’ve been able to buy. Think you have to document like the numbers, like how much you you’re buying ’em for how much you’re selling ’em for what your, your normal profit margin is, what the, uh, cash flow numbers would look like on ’em what the plan would be.
And then frankly, the conversation becomes Adam is sitting down with Mr or Mrs. Investor, and Adam’s saying, listen, I’m okay, giving up half of my normal fee or I’m okay. Giving up all of my fee. But I won’t, I, I have to recover my advertising dollars, which is X. And I would like 30% of the deal. You’re gonna have to figure out. I tell everybody this. I have people that call me all the time. You don’t want to ask for the entire enchilada dinner and not be willing to let someone else share for it and share, share it. And instead, you’re just asking them to pick up the check. Too many people wanna bring the deal, want to get paid full price for the deal they want, then want half of the deal while someone else puts up all of the money and yeah, it just doesn’t work.
So I, I think start small, finish big and you know, document out, you know, just start with the last year, 12 months, looking back, show what you bought, show what you bought ’em for what they needed. Look on MLS, see what they ended up selling for. If they were there, that would be a great kind of, you know, factual proving ground. Uh, and then look at your estimated rehab and then come up with a pitch. I’d probably take the pitch and say, Hey, look, you know, Mr Mrs. Investor, I’m used to making 30 grand a house. I’d like to be able to make 15 a house so I can pay my team and pay my advertising. And then I would like to get half the cash flow and half the profit after you get 8% on your money. So it’s almost a partnership. It’s almost a private lender relationship and you’re not taking money, uh, at the front end.
So I don’t know that that sounds like a deal I may listen to, uh, as a investor, I may counter at 12% preferred return, or I may try to get you to, you know, maybe the 8%, but I want 70% of the deal and you gotta get 30% of the deal. Again. I think you start small and you start simplistic and you work with someone you can trust, or you gotta scale your living expenses all the way down and put as much money back as possible. And start with one and then add, add one more and then add one more and then add one more and push yourself to adding properties to your portfolio because you’ll look back and you’ll just be amazed. Anyway. I hope that helps Adam, if not reach out to me, let me know how I can help him help further, uh, appreciate you taking the time to write the question. If you’re listening, hop to Ihavelunchmoney.com. I’d love to answer your questions too. I’ll see you tomorrow.
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