You’re not begging for money when you’re looking for capital. To talk to investors about OPM (Other People’s Money), you need to understand that you’re offering them an opportunity. Listen to this episode as Scott Carson breaks down what mentality you need to have to successfully raise capital in real estate. He shares some tools for getting investors to reach out to you and how to locate them. He’ll even share with you what you need to say in your presentation or pitch deck. You’d regret missing out on this episode!
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How To Talk To Investors About OPM
I’m excited to be talking about some great stuff. I know that you are all interested, that’s why you are here. Joining me on this show on the Dia de los Muertos, the Day of the Dead, if you are from Mexico heritage. We are going to be talking about some dead Benjamins, dead presidents, and how to help raise that for your deal flow.
We will talk about OPM, Other People’s Money, and focus on talking to investors. It’s not a difficult thing if you know how to do it and approach it from a different mindset. I have gotten more questions and phone calls from you guys out there about this specific subject. “I’m starting to market some deals. I’m starting to get people to reach out to me. I’m starting to let people see some things that I’m doing. I want to have these conversations with them. I want to get them. They are interested. How do I convert them? How do I get them to say yes to me and get rock and roll to fund my deals?”
For those of you who are joining us for the first time, we have a variety of people that attend Night in America, investors of notes, real estate investors, people interested in learning more about note business. Also, we do have this show coming out pretty regularly on any way that you listen to podcasts. It is on Apple. It’s also on my website as well. You can always check it out at Note Night in America. Do me a favor, hit a five-star review or hit a five-star and leave reviews. I would love to have you on there.
Getting into OPM, talking to investors, most people think when they’ve got talked to an investor, it’s like a scene out of Wall Street, Charlie Sheen’s character, Bud Fox, trying to land Gordon Gekko. Other people may think of The Wolf of Wall Street when he’s closing people on, and they are selling them on some things. Jordan Belfort was the first person to innovate the call book. I was speaking with a buddy of mine who is Jordan Belfort’s sister during the Wolf of Wall Street days. The book was 2 inches thick with all sorts of objections. They object to this, you flip over to that. If they said this, you would object to it.
You are thinking maybe it’s high-pressured sales like in the movie Boiler Room. You feel like a fish out of water starting. “I’ve got to open the 40 accounts, then I’m off to rock rolling.” No, that’s not the case. Also, you are not going to end up risk getting shot at or changing your voice as they did in the movie, Sorry to Bother You. You also don’t have to risk having a Coke come flying across the crowd and hit you in the head either nobody is going to shoot you or stab you. Unless you are raising money in the hood, and I have raised money in the hood, and I have been shot at twice but it wasn’t because I was raising capital. It’s because I was in a bad neighborhood.
You’re Not Begging For Money, But Offering An Opportunity
We are just talking about the conversation. Many people will get nervous about this. When you are brand new, if it’s not something you have ever done before, that’s okay. It is normal to feel nervous about what you are doing, especially if you don’t come from any type of sales background and stuff like that. The number one thing that you have to realize, ladies and gentlemen, if you are to start raising capital or taking OPM, Other People’s Money, and putting the deals is that you are offering an opportunity.
You are not going out looking for a crappy house that you are not going to do anything with. You’ve got an opportunity. You’ve got a real deal. You found a nugget, a deal that can turn into a very positive outcome one way or another. If it’s notes, get them back re-performing or if you have a foreclosure, take the property back. It’s an opportunity. You aren’t begging for money. “I don’t want to come across like I’m begging for money.” This comes from people that have capital or people that have no cap. You are offering them an opportunity.
If your best friend were the founder of Google, YouTube, Tesla, Bitcoin, or something like that, you would want them to tell you about it because you then could invest with them or do something with them. You are offering people an opportunity. If they say no, that’s okay. What you have to realize is if the deal that you are going to put them in weren’t a deal or weren’t something profitable, you wouldn’t be talking to them. You would be doing something else. You don’t want them to waste your time as well but you are not here to waste people’s time.
You are offering them, by them, friends, families, people you meet, investment clubs, people that answer direct mail, emails, flipper, an opportunity to invest with it. An opportunity to put some lazy assets to work, to turn their certificate of disappointment into something. You are going to give them an above average rate of return than what they are used to getting. They don’t have to go out and find it.
People don’t have to go out and hunt their own stuff. You are finding the deals. You are giving them the opportunity to get involved with you on a passive basis for an above average return. It is not high-pressure sales. This is the last thing if it’s high-pressure sales. We are talking about an opportunity. “If this is for you, great. If it’s not, move on but at least can I share with you what I’m doing?” It’s not going to be for everyone. You don’t want everyone to be an investor. There are people out there that are assholes, sue-happy, talk bad about people or they have no knowledge of real estate.
They are not sophisticated and smart. It’s their last $5,000, they are hanging on by a limb. No, it’s not for everyone. You don’t want everyone to be investing with you. You are going to eventually find every time that you hit, and you align yourselves with a specific niche of people that come talk to. Everybody sucks at this at the beginning. Embrace the suckism, a term that the Army or the Marines uses. Maybe they both use it. We have used it here for years. You are going to suck at things at first. You are not going to have your perfect pitch down.
If you wait to get your perfect pitch down before you go talk to people, you are never going to talk to people because the only way you get better is by screwing up. Embrace the suck and realize you are going to hone your skills. If it’s your 1st time or 100th time, there are still be things you screw up on, and that’s okay. For most people, it’s a lot easier raising capital than going out and finding deals. They are like, “What?” It is because once you realize it’s not this crazy grandiose thing or something to be scared of, it’s something to embrace.
You come from a different mindset. “They won’t invest with me.” Why would they invest with you? If you are not the person doing all the work, you’ve got a whole team behind you. Why not? One thing, good deals find money. I had an investor reach out to me. “I’ve got $5 million hotel making 5% I can take over. Do you have an investor?” I’m like, “For what, 5%? Is there a discount?” I don’t know if anybody is interested in making 5% of their money. That’s an active real estate investor.
If you want to go out and raise capital, put a fund together, you could do that. “I didn’t want to do that.” That’s a different thing. You’ve got to start off with individual deals. You can’t try to hit a grand slam at the park. Your first time at it, it’s not going to happen. I have raised millions of dollars. We will continue to raise millions of dollars. This is a fund that we are working for now, but the whole premise is if there weren’t deals out there, I wouldn’t be raising capital. The deal comes first.
What’s So Great About Note Business? You’re Not Alone
Our buddy, Joel Black, “It’s good to have the money, then you can have plans,” but you’ve got to build some experience first. We are not talking about raising $1 million. We are talking $25,000, $50,000, $75,000, $100,000 starting that process, get the ball going. That’s why we talk about starting with one-off deals. The most important thing when it comes to raising capital, and this is what’s so great about the note business compared to fix and flippers and things like that. You weren’t doing this deal all by yourself. You are not the person out there trying to mow the lawn, fix the paint, and fix the eaves, or rehabbing the property when you have no experience.
What’s so great about the note business we have vendors, attorneys, realtors, servicing companies. You’ve got me to coach you through it. I’m talking with twelve people throughout the different weeks, people working on their first couple of deals and holding their hand through it. That’s great but you are not in this alone. Many people will be like, “I’m on this alone.” No, you are not. When you have no experience, leverage your team.
Here’s the thing I want you to keep in mind. Somebody saw this and found it valuable. I said, “Everybody could raise $1 million in the next 90 days. The question is, ‘How many people do you need to fund $1 million?’” “One for $1 million dollars.” That’s not going to happen right off the bat. You need a few people to come in. If you’ve got 2 people with $500,000, great. If you’ve got 5 with $200,000, great. If you’ve got 10 with $100,000, great. The magical number that we see across the board is 67% of people that have an IRA have more than $150,000 in there. You are somewhere between 5 and 10 people away from raising $1 million.
If you need to knock it down to $50,000, you need 20 or 40 people at $25,000. I would not invest with people or have people invest with you that have less than $25,000. Make sure it sure as hell, it’s not their last $25,000. You don’t need to raise $1 million to go buy an individual note. There are a lot of people out there buying $30,000, $40,000, $50,000 assets across the country that are still great, phenomenal returns on investments for passive investors, also good for the active investor.
To get to $1 million, you need somewhere between 6 and 10 people. Maybe a little bit more, depending on where you are at. The older and the more established you are, you’re going to have friends, relatives, and people to identify with. The younger you are, if you are 30, 35, no offense to you, we’ve all got to be there somewhere, you will probably going to deal with more people that have smaller amounts, $25,000 to $50,000 to get the ball rolling initially.
Complete Your LinkedIn Profile
Maybe you have seen this before or you haven’t but one of the things that we do, we track our audience. I track where people are watching us from, whether it’s across our episodes, our YouTube channel or a Vimeo channel. I know roughly where people are watching this from. One of the things that we do look at is where our market is. “Who’s opening where? Where are people located?” We will spend time and money on those markets, cities, and stuff like that, so we can capitalize on them, knowing what’s going on in that market, deals in those markets, along with the trends that people are not investing in those markets where they are looking to invest as well.
Get The Word Out For People To Contact You
One of the things that we do is we will always look and see, “How many investors are in a market?” During COVID, we did a whole top 40 markets or top 40 roadshows, where we went through 40 markets over 30 days, and we pulled up the number of investors and people with an IRA account, and then people with an IRA over $150,000.
No matter where you are at, there are so many people around you that have money and not making anything. When we have talked with some of the people with different self-directed IRA companies, they tell us what they have or they say, “What do you have under management, $1 billion, $500,000 or whatever.” The number is always about 30% to 40% of the money they have under management, making 0%. They have investors that put money into a self-directed IRA to invest, and they have not pulled the trigger.
They are sitting there waiting for somebody to show up and help them make some money. They are looking for the right deal and opportunity. Keep that in mind. When we pulled the numbers and the top 30 markets to give you a bit of an idea of how many people have an IRA in a Pacific City, the number one market is Houston, Texas. People that have an IRA in Houston are over 100,000. LA, 171,000 people, have an IRA. Chicago, 141,000. San Diego is right over 90,000. St. Louis has 60,000, the number that surprised me. Dallas, 50,000. Austin has 40,000. Orlando, 27,000. San Jose, 57,000.
There are a lot of people that have money and IRA account making zilch, barely anything. It’s like millions of people have cancer, and you have the cure for cancer. You have the cure for a poor return. You have the cure to help them get their money into something that helps them get an above average return on their investment. You have to realize when you adapt that mentality and start thinking about that, it should change how you approach it.
“I am offering something good here. I have an opportunity. It’s a win for me but it’s a win for them. Not only do they get their IRA back up and running but they keep up with inflation and all the other stuff that’s going out there. Many people forget about that. What if you had 1,000 people, not millions of people, not 20,000, in your county that you had their name, address, working email, and a phone number? It would be very valuable.
How To Figure Out The Home Value
If you had that list, you would know what their home value was. You could figure out if they are homeowners. Based on what kind of house they have, you could probably determine what income level they have. How do you figure that? One of the magical things that we do when we see somebody live in a specific house, we take their house value times 4% interest rate or less, it depends on the market. What’s that annual interest payment will be divided by 12 then multiply that number by 3 or 4. People are going to live above 30%, 33%, 34% of what they make when they have a house.
That number is our own number but that comes from me being a mortgage broker back in the day. Taking what their home value is multiplied to 0.2%, 0.4%, whatever the interest rate is at the time. I would say 0.4%, so you are higher than a little bit. That’s going to give you total interest pay, divide that number by three, and that’s roughly what their monthly income is.
Susan asked the question, “Do you contact self-directed IRA companies in those cities to find out what clients need somewhere to put their money?” Susan, I know that they need somewhere to put their money. There’s no doubt about that. A self-directed company is not going to give you that list but you can go up on the county records and find people at the county appraisal who bought a property with IRA people at the County Recorder’s Office who have lent money out of that or you can pay a list service. A lot of times, we will buy a list from a list service that gives us 16,000 names across the country in different cities that we will dive in.
If you pulled this information and if you had 1,000 people, would you do anything with this list? No, you wouldn’t. Only 10% of people take action. I’m making this a joke a little bit because I love you guys, but honestly, no. Many of you have already been through a workshop, and we talked about this. We showed you how to pull those lists and leads, and none of you are doing anything. That’s the most frustrating thing.
My education side of what we do is that we show you how to pull these lists, and people will not take action but if you take action, you will find success. Less than 10% of people take action. You won’t do anything with it, which is sad because you have the cure. Let’s say you’ve got a performing note that you want to cash out. It’s a great return for somebody and cash out a big chunk or stay in the deal or sell it. If you’ve got non-performing notes, there are people looking for returns and people dying out there for opportunities.
We showed you how to raise the capital and how to find these deals but would you do anything with them? The thing that scares people is, “I can find the list but what do I say to them, Scott? How do I talk to them? They are going to ask me questions.” You can find people on LinkedIn, Facebook and we talked about connecting with those investors. That’s one of the things that we do. We will pull these lists, and we will start slowly connecting with them either through email, LinkedIn, Facebook or Twitter. We’ve got a VA that helps us with that implementation.
It takes some time but we are not going to be around for a year. We are going to be around a long-term 5, 10, 20, 30, 40 years. I expect to be working until my 80s. It’s not work if you enjoy what you do. I won’t be doing the show. The point I’m trying to make is there are investors around where you are at. All of you could do is go to the county records. In every county, county recorder, and county clerk, look for IRA companies, equity trust, the grantee, grantor, or the mortgagee, mortgagor in your county to find people who have lent money out of their IRA.
You can send old-fashioned direct mail to them. This is still the only thing that we send mail to. We don’t send postcards or yellow letters out to note investors or banks. I want to share that to show you how we preempt that call and the conversation and how we get people that we reach out to say, “I’m interested in finding out some more.” I can go to a city and pull up addresses where people live to see exactly where they are.
Drop A Postcard
We had a property in Cincinnati that we took back. We sent out about 850 postcards about that deal to investors in the area there, and we raised a ton of capital from it for that one deal. People were fighting over it to fund the deal, which made our price go up. If it’s not the right deal for you, we can call you on the next one. That’s the whole thing. Not everybody is going to be ready to go when you are ready to go.
This is not like the Boiler Room. This is meant to be something easy to put in place with a little bit of work and investment. The first thing that we do a lot of times is dropping a postcard. This is one of the postcards that we send out, “Is your piggy on track for retirement?” That’s the front of the card. We buy these at $5,000 or $6,000 a chunk because they give us an extra bonus from PostcardMania, that’s who we use. It’s got our company name, logo, website, phone number, and email address on there, and then we leave the rest of it blank but we add different things to it to switch it up and test our marketing, depending on where we are sending it to.
If I have gone to a REIA club, I will pass these as business cards. “If you like to get more information, fill out your name and information and return it back to me.” We send that out. “If you’ve got a 5×7 floppy postcard, would you look at it?” Especially if I read little thing on there, “Are you looking to invest? I see you have used your IRA to buy a property in this neck of the woods. We would love to talk with you. Check out our website or video on how to capitalize on 2022.”
We are talking about distress debt or your pitch deck video for fifteen minutes. “Find out how we are making America great again, one default borrower at a time. Would you put a 1-800 number or a phone number where people could call you and ask you questions about a deal?” You put a picture of the property, “We closed this in your backyard. Give us a phone call to find out how you could have made an above average return by working with us.”
You can request an eBook, that’s the whole reason why we wrote a book. How to Buy Real Estate for 40% Off. We send this out a lot of times. “If you would like to learn about note investing, you could go to this website, and you can download your free eBook or request one, and we will send it to you.” If I’m local, “I would love to meet you for coffee. Let’s go meet at the Starbucks or Mojo’s down the street or Panera or someplace neutral. If you would like to meet for coffee, let’s do that. Come by the office. Let’s meet at the title company or some Meetup group.”
It’s not meant to be a difficult thing. We plan our years out. I’m going to an event. It’s the Private Lender Expo in Atlantic City, New Jersey. I’m taking a stack of these business cards with us. “If you would like to find more information about our deals, turn it in or go to this website and register.” Simple information to pass out. How many of you would throw it away? Some of you would throw it away, which is okay. You are not the right person.
I guarantee most people now, this is why we are doing this on the first part of November 2021 is that people through the next two months and into the Q1, are going to be looking at their quarterly statements, investment accounts, inflation, price of gas, and everything else, and seeing if their numbers are working. I’ve got people who call me out of the blue, “If you’ve got anything under $30,000, $40,000 or $50,000, I’m looking to buy. I need to do something. My cost to rehab has gone through the roof. I can’t find deals anymore. I need opportunities.”
As note investors, if you are willing to put in the work and if you find the deals, you are offering these people opportunities but you have to start doing something. Sitting at home and praying for your investors to show up at your front door with bags of cash is not going to happen. I’m sharing exactly what we do on a daily and weekly basis. We send a book out. We even have an eBook on using your self-directed IRA to buy real estate that I have created for myself.
I have also created this book for our one-on-one coaching students. They can go in and add to the last chapter with their information case studies. They have an eBook that they can use as a gift to potential investors. It’s a great thing. I love giving it to people because it’s an opportunity. We wrote and tweaked it. People are looking to network. We started when we did our mastermind in Cape Coral. We didn’t have it in 2020 because of COVID.
In Cape Coral, we started a Meetup group, Distressed Debt Investing in the New Year. That was the title of it. It’s now called the Cape Coral Note and Self-Directed Investors Meetup. It’s pretty easy to set up a Meetup. You can do this in your own backyard by getting people together for dinner, coffee, lunch on a Saturday or an evening, once a month, and start connecting with people. We invited people to the group.
I had 50 people coming to Cape Coral for a mastermind. We did this meeting. Opening night is always a cocktail and happy hour for us. Why not invite some other people out? I dropped out 3,500 postcards in the surrounding area. We had twenty people show up. Some people are like, “Scott, that’s less than 1%.” Yes, but those 20% were great. We raised $500,000 off of those twenty people.
One person came in and said, “I’ve got $50,000.” Another person said, “I’ve got $50,000 to start.” It was a beautiful thing. It paid for itself. All those people are still investing with me. That’s not hard to do. Everybody can do that. You can go to Meetup.com and start a Meetup group. All you need is five people to opt-in, and it will go from there.
In the second phase, after we send a postcard out, if it gets returned because we put our return address, then we remove those people because those addresses are no longer good because now we are going to drop a mail piece to them. One thing you can do with your postcards or your letters, we don’t send regular business white envelopes out. That’s a party envelope. We buy the ones from the FedEx office or Walmart, where it’s multi-colored big bundles. I do not want white. It’s the cheapest. It looks like a bill. People don’t open their mail if it looks like a bill but they will open their mail when it looks like a party invite.
That’s what we do. It’s a 6 to 7-page mailer. Nice glossy paper, and it looks good. We send them our hello letter. “Hello, we came across your information. We thought you might be somebody in Dallas County that may have used your self-directed IRA to buy a property for investment. If you did one of these investments, great. If you didn’t, disregard the letter. We close notes. We are an awesome investment firm buying distressed assets. We have been in business since 2007. We closed on a couple of deals or an award,” or whatever it might be.
“Why am I writing you this letter? It’s because of two simple reasons. First off, I’m hoping to build a large list of buyers for notes. The second reason is that we are looking for more partners to take down larger portfolios of notes by getting better deals at steeper discounts. Please see the sample deals I have included to give you a feel for what we do. I have come across all types of residential and commercial deals for short-term. Give me a phone call, shoot me an email or connect with me.”
In this letter, I attended an event, “If you would love to come on out, I would love to meet with you.” I sent this out to 500 people. I had ten people come to my event in Austin from San Antonio, Dallas, Waco. I pulled people that had bought a property with their IRA and sent them this letter weeks before the event. I made a couple of people show up. It was great. They came to see me speak in front of an audience. I know not everybody is speaking. I get that but you could invite them. “Come on down to our local REIA that meets once a month or every other week.” Those are little things that you can do.
Besides this letter, which is in our workbook for our virtual note buying workshop, I include an executive summary on the back of this letter. A little more about me and the business, what we are doing or focused on. I include a couple of case studies. They also include an article that I have pulled about IRA investors. I wrote the article, and it was in Think Realty Magazine, Investor Review for Self-Directed IRAs. I’m using third party proof. It’s not me. It’s two case studies, an investor longer-term and then one shorter-term.
The point I’m trying to get is doing something that most people get in the mail like a party envelope. “What’s this? Who invited me?” When they opened it up, “This is interesting.” This is the thing that we get from people. “I enjoyed what you sent me.” When they call you, they may want to ask questions about the deals, and that’s okay, talk with them. The whole idea here is to get these people to reach out to you to do something.
When we pulled 2,000 IRA letters off, we uploaded the list into LinkedIn because we had their email addresses, 1,789 of them have LinkedIn profiles. This is the great thing about real estate investors. Most of the people that have an IRA are going to have a LinkedIn profile, mostly professional. I sent a connection request to all of them. Out of that 1,789, I don’t know exactly how many connected with me but I saw an increase in people viewing my profile.
When I saw people looked at my profile, I looked to see who looked at it. If they were an investor, I will start a conversation. “I saw that you connected me. I saw that you checked my profile. I would love to talk with you.” When I take a bigger list and shorted it down, you may be surprised who’s right around you. In one pull I did, I said, “Give me every IRA investor in Travis County.” It was a big chunk over 32,000. I narrowed it down to one ZIP code, 7875. It’s bordered by three other ones but I focused on the one. There were 64 people in this one ZIP code out of those 2,000. You can see how they mapped out.
All of these are within five minutes away from me. They have an IRA, and now they are looking for a return on investment. That return on investment can vary based on the conversation. Maybe it’s 4%, 6%, 8% or 10%. If it’s 12%, okay. If somebody is not doing anything with their minds, sitting there making nothing, if you offer them a 4% return, that’s double or quadruple of what they are making. They are making zero. You would give them 4%, that’s better. If you give them 6%, it’s better for them.
Get The Opportunity To Talk To People
I had all these people five minutes away from me and they were right down the street. Some people live on the same street here. You had to share with them what you were doing. These days, everybody is so claustrophobic and antisocial. Unless it’s on social media here, we are not going to go out and talk to our neighbors these days. I’m very blessed that all my neighbors around here, sometimes Saturday nights, we are all sitting outside on the street here, having a cold one, enjoying each other’s company, talking up a barbecue. That’s not common these days. It should be.
In your free time to get an opportunity to talk with people, you could go out if it was close like that, hand out flyers or door hangers. It’s a great start. It’s very easy for you to do to get people to call you. That’s what you want. Getting investors to say, “I want more information.” That’s what you are doing with a postcard, a yellow letter or whatever. You want people to ask for more information, “I’m interested.” That’s where most people’s tiny holes tighten up.
Most people would say, “Somebody called off my lead. Somebody left me a voicemail or an email. What did I do?” They start flipping out, running around like they are scared to death. It’s not the chainsaw massacre. It’s something here to help you out. When you do that, you should be excited. Take a deep breath, and don’t be so nervous. “You are on the right track.” If you do that and get any type of response the first time you do something, that’s awesome. Eighty percent of sales are made after the fifth contact. It should get you rock and rolling. Imagine if I did it a 2nd, 3rd or 4th time.
When they reach out to you and talk to these people, it’s not just a call or a meeting between two people. It’s a conversation. “Thanks for answering my letter.” The thing is that people are like, “What do you say? How do you start these conversations off?” It’s how you start every conversation off. If you are scared to network and you don’t come from a networking background, you are a bit of a fly in the lawn, introvert, that’s okay. All you’ve got to remember is one word to get the ball rolling, it’s FORM. F stands for where are you From. What do you do for a living? What’s your Occupation? What do you do? What do you do for fun? What do you do this weekend?
I will give you a great example. I was tracking down some information on a borrower to see if there was a tenant paying the water bill or if the property was vacant or tenant-occupied, trying to find out how long that tenant had been in the house. I found out they have been in there for four years. It was not the name of the borrower. It was somebody else’s. He had other properties around the area, moved but had been living in that house. We’ve got to talk. I said, “Where are you from?” I’m talking to the guy that I found that, and he worked for Miami-Dade forever.
“What did you do for fun this weekend?” He told me, “We had fun. I took the kids out trick or treating. We went looked at some houses.” It’s a great conversation and builds rapport. “You are looking to buy. That’s awesome.” He didn’t know me. In the end, he was like, “Hang on a second.” He went and gave me more information because I built rapport. I come in and say, “I’m with a bank. We are getting ready to foreclose. I want to see if this property is occupied, and the water and utilities are on, and it was the same name because we are not getting any information from the borrower.” He’s like, “I can’t give you too much.” He became a lot more friendly.
“If you want to sell, what are you looking to invest in?” That’s beaten them. That’s the whole force. You don’t want to have high-stress sales. You are getting to know somebody. You are building a relationship or like you are starting to date. You wouldn’t go to some girls and say, “Let’s get married and have kids.” Instead, “Would you like to go for coffee? Would you like to go to dinner? Let’s do it again.” The point is this FORM method, F stands for where are you From. O stands for what’s your Occupation or what do you do for a living. R stands for what do you do for fun or Recreation. M is your Message.
“Jim, you are in Ohio.” I will ask for a repeat back what they told me. “It’s great to know you have lived in Columbus for twelve years, and then working as a software engineer, and then you like going out and having fun. You like going out and recreating some war battles where you are going to spend time with your kids or you are big Green Bay Packers,” or whatever it might be. You transition to the message.
Here’s what I do. “I want to thank you for spending time talking to me for a few minutes and then answering the letter or postcard we sent out. I’m an active real estate investor for years. I’m focused on buying distressed real estate, whether it’s foreclosed homes or I’m buying a distress note or distressed real estate at a big discount.” That’s when you go and do your message. Whatever your message is, you want your message to be short but you also want to ask questions and then shut up.
God gave us 2 ears, 2 eyes and 1 mouth. That means we need to watch and listen twice the amount that we talk. If you are interrupting the person talking or they are giving an answer trying to go to the next one because you are so worried about getting thrown up on them or getting diarrhea of the mouth and vomiting all over on them with information, that’s not what you want to do. You don’t need to teach them how the sausage is made. You need to say the sausage is this.
“Have you invested in real estate before? How did that turn out for you? Are you investing anything else? Have you taken any real estate classes? What excited you about the letter?” Depending on if you are meeting this person or over the phone, or via Zoom, whatever it might be. Try a great sales technique because you are all in sales, and you are selling them on your investment or they are selling you on not to invest with you. Mirror your potential investor because people will invest with people that like and trust that they identify with if the person you are talking to is quiet and soft spoken.
If you are loud and crazy, they are probably going to be not going invest with you because they don’t feel comfortable. If they talk slow, you have to slow your speed down. This is the thing I struggle with because I get so excited about what I do and speak fast. My buddy, Tom Hazzard, says I probably squeeze in twice the amount of words than a normal person gets in.
Always Ask The Question “What have You Invested In Before?”
When I’m talking with people, I don’t want to drink a lot of coffee. I want to bring it down. I want to match their energy, loudness, and speed however they are talking. I want to match it so that they understand, and it builds rapport there. You always ask this question, “What have you invested in before? How has that been done or performed? How did that go for you?” Shut up.
If they haven’t invested in real estate before, that’s fine. “Have you invested in anything before?” They are probably going to say no at that point. Not necessarily, but if they haven’t pulled the trigger even on buying and investing in their 401(k) or anything, they are probably not going to pull the trigger on you. It depends on talking to them.
Never ever judge a book by its cover. When I was starting as a financial advisor, and I have been trained on asking questions by some of the best sales companies out there, Verizon Wireless, Enterprise Rent-A-Car, Chase Manhattan Bank. “Never judge what they are wearing. They can be coming from something.” The biggest mistake I made early on was I judged a guy who wanted me to meet him in his trailer park. I showed up. He had his green shirt on and a big semi-truck. I was like, “This guy doesn’t have any money.” He gave me $250,000 to plump with me to invest in stuff.
Everybody has a funding source. It may not be them but they may know somebody. It’s an opportunity for you to give your pitch, to sell your craft, to hone your stuff by talking with anybody you can talk with. I always ask you, “What are you looking for? What term are you looking for? A short time, 3 years or less or 5 years or less like a CD? Are you looking for a decent above average? Are you looking for a return?”
When you ask them what they have invested in, they tell you what they have invested, “It’s in a CD.” “How is that doing?” They will tell you like, “1% or 2% or negative percent,” keep that in mind because that’s a great opportunity to say, “If you are making 1% over here, if I could show you a 3% or 4% for a short time of three years or less, would that be something that interests you?” “Yes.” Some people need cashflow. If they are older, they need to get some cashflow coming off their stuff. They are maybe living off of it. If it’s in a self-directed IRA, they can’t touch it. They can’t live off of it. Maybe they need to make sure it’s low risk, whatever it might be.
These are great questions to ask but then listen. You have to listen to what people tell you because they will tell you their hot buttons. “Six percent, if we can get that, that sounds risky.” If someone comes to you, “I want to make 20% or 15%,” they are probably not the right people to work with. “This probably is not for you because, with these returns, total profit is probably around 20% but we’ve got to make some. We’ve got to pay people.” If someone wants 15%, 20% and they are not doing it, then make them go do it themselves. “This isn’t the right time for you. Thank you. I appreciate it. Best of luck to you.”
You always ask them because the last thing you want to do is go through a presentation and then come back, “I’ve got $1,000. I’ve got $5,000. I’ve got $100. Can I invest with you now?” How much are they looking to invest? “What are you looking to? How much are you looking to put in the work? $25,000, $50,000, $75,000?” I wish I could help everybody but when people tell me, “I’ve got $10,000. I’ve got $15,000,” I’m like, “It’s a little too less. It’s not enough to do anything with. Let’s maybe have you do something later on or let you keep building that, and we will go from there.”
You don’t want to invest in anybody who’s got less than $25,000. An important thing too, “Where are the funds coming from?” “I’m going to show up with a bag of cash at National City when we get across the border from Mexico, $25,000.” That’s probably not a good idea. “It’s coming from a line of credit.” “Are there interest rates of the line of credit?” “It’s coming from a CD I’m cashing out or closing on a deal. I’m getting a check on this. I’m going to run a roll into something else. It’s in an IRA now.”
Find out where the funds are coming from. “It’s coming from my trading account.” If it comes from a trading account, then you know you’ve got to do some work to get them to send it in to a self-directed IRA. If this was going from their checking or savings account, that’s pretty easy with a wire but it was coming from my Scottrade or AG Edwards or something like that, you know you’ve got to create another account for that Equity Trust, Quest Trust or Rocket Dollar and go from there.
“What do I need, Scott, to make sure I’m rock and rolling?” First and foremost, people are going to go do their due diligence to make sure you have a complete LinkedIn profile. Make sure you also have a website. A website is necessary these days. You don’t have to wait to start marketing for money until your website is ready. You can start marketing now. You can send people to your LinkedIn profile, have a forwarding link where they go check you out on LinkedIn.
Don’t wait for the perfect website before you start doing it. Don’t wait for everything to be perfect. Start getting the word out. I’ve got plenty of people that raise capital without ever having a website because they relied on their case studies and their team around them. They didn’t have a website. They put one in together. They weren’t spending money on a website. They were spending money on a direct mail blast to make things happen.
It’s good to have a sample presentation with sample deals or a pitch deck, as we have talked about creating the perfect pitch deck out there. You can see that on our YouTube channel, Perfect Pitch Deck. Something that’s not 20, 30 pages long but it’s going to be 3, 4 pages long. “Here are the types of deals that we do.” Talk about the case. “Here’s what we do and what we are looking for in our vendors or our team.”
The one question I get all the time is, “I’m going to go prove this concept.” Screw that. The concept has already been proven. You don’t have to prove anything. The bank is on that opposite side. It’s time for you to be on that side. If they haven’t done any deals, talk about the types of deals that you do, “These are some of the past case studies types of deals that we are doing.” You can say, team, “I’ve got a team of people. I’ve got a VA, attorneys, servicing company.”
Name them off. “Here’s our team. Here’s my wife and me. Our friend, Laura who does a lot of the due diligence for us and our VA, Jessalyn. We have Madison Management, and here’s Kevin over at Madison Management. He’s done thousands of deals. Here’s Daniel Singer, our attorney. He’s our master attorney handling stuff. Scott Carson, the guy has been teaching me for years.” If they ask you how many deals you have done and you don’t say, “You are looking at closure versus deal first.” If you’ve got your systems down and everything in place, and the deal makes sense, why not? Talk about the market opportunities.
Ladies and gentlemen, we have had so much amazing headlines when it comes to the distressed market, the big turn down. If people are going to ask you, “What happens if the market crashes? “That’s good for us because we are buying assets at 50% to 60% of current market value. It’s not going to crash that but we are buying these deals at a big discount, and people want to stay in their house.” Maybe you throw in a couple of news articles.
These are the types of deals we do. I have had people use my case studies for years and have raised capital from it. I ask them, “Is this still something you are interested in? Do you want to get on our hotlist? Do you want to talk about the next steps? Does this sound like something you are interested in? Should we move to the next level? Should we get a little more serious? Let’s take it to that next step.” Don’t be afraid to ask that. If you go through the information you never get to ask, then you waste your time. This is the ask, “Do you feel like this is something that you might be interested in doing or partnering with me on this stuff, or a deal to get your feet wet? What do you say? What are you thinking?”
People will say no, and that’s okay. Not everyone is a yes. When somebody tells me no, it means not now. A no is good. It means not now. “Come back to me later.” “I will be glad to do that. I will add you to my list.” If they tell you no now, you probably need to get better at your pitch or talk. If they raised their hand and said yes, it is all you need. You’ve got their name, phone number, and email address. You can now add them to your drip marketing campaign.
As you market, “I’ve got another deal. I’ve got another, a case study of. I closed on that.” That will help them say yes, “Steve is closing some deals.” “David knows his stuff. Look at him. Kudos.” A no is good. Embrace the noes. It took me 40 noes before I’ve got my first yes as an investor. That was all in one day. It took me 69 noes to get a yes from Capital One. It took me 54 noes before I’ve got my first shit for buying a portfolio. Noes are okay. No means not now. It doesn’t mean, “Don’t ever call me back.” If you talked to them and they are on the phone with you or in person, they are not going to sit there and smack you in the face. If they do, they’ve got issues.
The point I’m trying to get is, as we talked about this, avoid your low-balance investors. If they don’t have $25,000 to invest or they don’t have that much in the market or anything now, they are not a good fit for you. You could say no to them, too. “You’ve only got $15,000. That’s great. That’s not enough to get going. Our normal starting point is somewhere between $35,000 and $50,000. I only do one investor per deal.” It takes 3 $10,000, put them together to do one deal. If you’ve got two other friends that have $10,000, you could start an LLC, and I could borrow that money from an LLC, that’s a different thing. I can’t go and bring $10,000, $10,000, $10,000 and pull you all together. That’s illegal for me.
Trust your Gut
You are not going to be doing a split of equity. We are giving people a flat loan rate, 4%, 6%, 8% or 10%. If they have less experience and are not on your end, don’t be going at 12%. They will think that’s risky because that’s what they are taught. Go at a 4% to 6%. “I could give you a 6% return on your money for 24 to 36 months. Would that excite you? I will cash you out in 36 months and maybe do it again.” “Let’s do it.” Trust your gut.
This is an important thing. If it’s telling you no, listen to them. It tells you that you are getting something wrong about the person, you don’t like how they feel. I have had people that I’ve got a gut, and then I find out they tried to change the interest rate in the loan documents or they would put me off. Trust your gut but if it’s telling you no, they are not the right person. Not everyone is going to be a yes for you. It’s still better to have friends than enemies. “I don’t like where we are going. If only we were a fit. I would rather part as friends and maybe in the future.”
You get better by practicing and role-playing your pitch. This is why it’s important to put these things. Do you want to get better at talking to people? Know your craft and know what’s going on in deals. Do not go in a meeting throwing some shit together and throw it on the side of the wall. One of the best and the number one sales training I could tell you is put together.
If you are going to put together a slideshow, make it less than ten slides but practice it in front of your spouse, kids, cousin, coworkers. “Do you mind? I’m going to go do something. Could you do me some help? Can I role play in front of you? Can I show you what I’m doing? I’m going to go meet with an investor, and I’m scared. I’m a little nervous.”
As people are role-playing, they ask you questions that people are talking to you. Write down their questions. That shows that you are listening to them. They will appreciate it. If you don’t know an answer, don’t lie and say something crazy. Instead, say, “I’m not 100% sure about that but I can get back to you.” Practice calling on banks, talking to investors, and going through your pitch. The whole reason we put our Perfect Pitch Deck up there, so you can see me talking and going through it. You’ve got to practice it multiple times. “I’m going to record it.” Practice it because you are going to screw it up and not know what the hell you are going to talk about.
The next step is if they are happy and ready to rock and roll, then you want to pull out your investor questionnaire. You do not want to put it online. You want to have it out separate from whatever you are going to give them. You have already asked them half the questions. What do they do? How long have you done that? Where’s the money coming from? How much do they look to invest? What have they done as far as real estate investing? You can fill this out.
“If you are ready to rock and roll, then here are the next steps. I need you to fill out this investor questionnaire. If you don’t want to do it now, that’s fine, but I need you to send it back to me. I also need you to send it back with a proof of fund letter, which is basically a statement, a quarterly statement or bank statement showing the funds that you have.” In the email, you send it back to me and say, “Scott, there’s $200,000 in this account. I’m pledging $50,000 to you for the next twelve months.”
These things help you get better at what you are doing. It also shows that they are yes. They say yes to meet with. It’s a yes, one. Two yes, if they fill out the investor questionnaire. Three, proof of funds. Fourth yes, is the pledge. If they don’t send the investor questionnaire back, the proof of funds letter or the pledge letter, they are not going to fund.
Here’s my magic rule. I will only follow up with people on these three times because I’m not going to bother them beyond that. They have met with me once, great. I said, “I’ve got a deal coming down the pipeline, if you want to get this thing in rock and rolling, I need you to send me that back, that investor questionnaire, and then a proof of funds, and then a pledge letter.” If they are not going to do that, then you need to move on to the next.
If people weren’t serious, do not let people waste your time. Especially if it’s coming from a retirement account, and it’s not a true self-directed IRA trustee, you are going to have them start that process to transfer over. You’ve got to get them on the phone or make an email introduction to somebody. I can’t make friends with somebody at Quest or Equity. Monitor, I want to get started, and then I will follow up when this person reached out to you if they get their form started. If they didn’t, I’m willing to go back. “If you need some help filling out this direction stuff, I’m glad to help.”
Those that have reached out to me. If they haven’t filled out their investor questionnaire, you add them to your hotlist. I’ve got a hot list that we send a text message out to. “I’ve got a deal. I’m looking for funding for it. It’s $100,000 or $50,000.” That’s my hot list via email and text message. That’s a reminder. “I want to get involved.” “Send me your stuff. These are the things I need for my accountants and attorney. I need this from you to protect myself.” That sounds better to prove up that you are a real investor.
The beautiful thing is sending an email or using EZ Texting to your hot list. Email them your current deals. When they said no, I still keep them on the list because it may take some time to come around but I’m only going to ask them three times for the investor question. If they don’t send a third time, I wouldn’t say they are not ready but we will still add them to the hot list and keep moving on. We add them to our newsletter.
If you closed the deal, you may want to highlight that. Follow up with them. See if they’ve got a LinkedIn profile, connect to them on there. As you are posting other deals, you want them to see an email from you on social media posts and buy deals. They are like, “He said he didn’t have a lot of experience but he is sharing some great stuff online.” The only way you are going to get better at this is to practice.
First and foremost, getting the word out about what you are doing and getting people to contact you. That’s the first thing, whether it’s going networking and doing the old one-on-one way or going out and starting to connect with people online. Let’s say they are investors or LinkedIn, that’s the way that we do it as well, sending out a letter or a postcard starting that boggle.
That’s the only direct mail that we do. If you are looking for people in your area, all you’ve got to do is drop me an email. I bet you I can tell you in five minutes and see how many people are in your area and show you how to pull it. It’s not hard. We have done it all the time on our virtual workshop and walked you through that.
Catherine Bell, I’ve got to give her a big kudos. We were out working with her one-on-one, two days in Phoenix. We pulled the list of 700 IRA investors that have bought a property or funded something around the two counties there around Maricopa County. She sent out letters to them. The exact letters I told you. Within three days, she got a phone call from the investor she talked to, who pledged $200,000 to her first investment. She’s all jacked up. She sent me a picture, and she’s so excited. That made all the mailings for the next year to send out to get $200,000 worth it.
You’ve got to start doing something. That’s what it comes down to more than anything else, practice. We have role-played. You see me go through things. There are different presentations online. If we have even thought about taking together and doing a one-day workshop to help you guys put your things together and practice, if that’s something you are interested in, let me know. I’m glad to do it but you have to take the action and take the first footsteps.
I see people on here that I know can do big things that aren’t doing anything. They are trying to get by the bare minimum, and you can’t do the bare minimum. The bare minimum will get you bare minimum if not negative results. It’s not hard. The only way you get comfortable at doing things is by going out and taking action and practicing.
The only way I’ve got good as a linebacker in high school and college is I practice every day. The only way I’ve got better in Enterprise Rent-A-Car is we practice and role-play. We went and talked with people who had gotten a game. When I was working at Verizon Wireless, I was the number one sales guy because I practiced and role-played more. When I was a great financial advisor and banker with Chase and number one in the state, it was because I practiced and role-played. It also led to why I’m a good loan officer and a good note investor because I’m not afraid to talk with people.
You are going to screw up. You’ve got to realize every time you screw up, you get better at what you do. Some people are scared of their shadows or script. It’s okay. Go to the next. There are hundreds of thousands of investors out there. One screw up, forget it. Move on to the next one. You let one person affect the rest of your day, week or the rest of what you do, it’s beneath you. You are all better than that. I want to thank you all for reading. Thanks for coming in strong. You all are capable of doing amazing things.
- Apple – Note Night in America
- YouTube – We Close Notes
- Vimeo – We Close Notes
- How to Buy Real Estate for 40% Off
- Private Lender Expo
- Cape Coral Note and Self-Directed Investors Meetup – Meetup Group
- Investor Review for Self-Directed IRAs – Article
- Perfect Pitch Deck – YouTube