#036: Funding Equals Freedom Series – Part 5

Welcome to The Accelerated Investor Podcast with Josh Cantwell, if you love entrepreneurship and investing in real estate then you are in the right place. Josh is the CEO of Freeland Ventures Real Estate Private Equity and has personally invested in well over 500 properties all across the country. He’s also made hundreds of private lender loans and owns over 1,000 units of apartments. Josh is an expert at raising private money for deals and he prides himself on never having had a boss in his entire adult life. Josh and his team also mentor investors and entrepreneurs from all over the world. He doesn’t dream about doing deals, he actually does them and so do his listeners and students. Now sit back, listen, learn, and accelerate your business, your life, and you’re investing with The Accelerated Investor Podcast.

So hey, welcome back to Accelerated Investor and hope you’re enjoying this discussion we’re having. This is part number 5 I believe of our 10 part series of talking about private investing, private lending, you know, being a private money lender, borrowing money from private investors. And again, I want to tell you, this is really for informational purposes only. I’m not giving you legal or financial advice, but just, you know, just telling you exactly what I do and how I do it. And we’re going to talk in actually part number 10 a little bit more about the sec and about the proper regulations registrations in order to recruit capital if that’s what you want to do. But in this next 5 parts, part 5, 6, 7, 8, 9, we’re going to talk about my five step process for raising capital. So let’s jump into that right now.

And if, so, if you’re thinking about raising money for your real estate investing or for your business, you might have a business of some other kind. This’ll definitely relate to you. You can definitely take some of the things that I’m saying and you can use those in your own business, even if it’s not a real estate investing business. So when I think about raising money, the very first thing I think about is crafting an irresistible offer, okay. The other thing I think about is don’t be cheap. Don’t be cheap. If you want to recruit capital, you know, investors can get a 6% or a 7% return on the stock market. They can get a 9% gross return on the stock market. So if you’re thinking like, I’m going to craft an offer and I’m going to pay my investors 8% or 10% the feedback that you’re going to get is well, I can get that in the market.

Why would I do it with you? So you immediately have an objection, your first objection. So in order to avoid the objection, the first thing you want to do is craft an irresistible offer. Something that people can’t say no to. So we talked about this back in episode two and episode three of this series, is that when we recruit capital, when I first started doing rehabs, I would recruit money and I would pay my investors 12% interest or 15% of our profits, whichever is higher. And I’d never had anybody say, wow, that’s a dumb idea. That’s a dumb return or that’s not good enough. They all said, well, 12%. Wow. Okay, that’s better than the market. That’s the response that we want. It’s crafting an irresistible offer. When we invest in apartments, right? Typically want to invest in value at apartments. One of the irresistible offers that when we invest, okay, or when we’re recruiting money for people to invest in our deals, we’re often, again, this is, I’m not soliciting money here.

I’m not soliciting your capital, so don’t take it that way. This is for training purposes. But we set it up where the investors that invest in our apartment deals, let’s say they bring in $100,000, they get, let’s say 1% equity ownership in an apartment building, a big $10 million apartment building. Well, when they do that, they get, you know, 10% preferred return during the stabilization phase. Then after the building is stabilized and we refinance it into permanent financing, they get cash out refi proceeds. Then they remain an equity owner in the building in perpetuity. So they get cash flow and perpetuity and they get equity in perpetuity. They also get appreciation, depreciation and principal pay down on the loan, so there’s actually seven benefits. Seven, when they invested in our apartment, that’s an irresistible offer. If you’re doing rental properties, maybe you pay your investors, look I’m going to use your private money.

I’m going to pay you a 10% maybe you’re a private lender, I’ll pay you 10% on your private lender loan through a note and mortgage, or maybe it’s a 10% preferred return if they’re investing equity, which means they get the first 10% on their money before you get paid a nickel. You know another irresistible offer that we’ve used before is 10% interest and 10% of the profit in perpetuity in equity. So we pay them their 10% preferred return. We defer it all to the end. We defer all until the property pays off when the property pays off, okay? Then they get their principal back and all their interest and they remain a 10% owner in that rental property in perpetuity, okay? They’re building equity, they’re building cashflow with none of their own money in the deal, okay. So if you are building your company and you’re selling products or you have a real estate investing business, self-storage, residential assisted living?

Again, remember we talked about this back in episode a, part two and part three is craft an irresistible offer, but then also when you come up with your irresistible offer, the next question is going to be when are people going to be getting their principle back, okay? So when I look at crafting my irresistible offer, if I’m looking at recruiting capital for my real estate transactions, I got to answer those two questions. What’s a great irresistible offer that works for them and that works for the deal that the deal can support the return, and secondly, when are they going to get their principal back, okay? If you can solve those two questions, those two, and give great answers to that, you’re well on your way to being able to recruit private money. Now, the other thing I want to tell you, I’m going to mention this in the next 5, the next 5 episodes in a row, recruiting private money and talking to investors about money.

It really comes down to passion. It comes down to your moral code. It comes down to your ethics. And my friend Francis told me years and years ago, he said, you know what, Josh, if you sell something, it doesn’t matter if you sell, you know cars, if you sell jeans, if you sell books, if you sell eyeglasses, if you sell money, if you sell real estate, it doesn’t matter. Whatever you sell, if you are convinced that your customer, your client is better off having used your product, they’re better off having invested with you, are better off buying your service, then you have a moral obligation to sell it to them. And so when I look at money, when I think about my circle, my sphere of all the people that have invested with me, I feel truly like they’re better off. They are going to have more money, more equity, more profit, more cashflow, a higher return, lower risk by investing with me than anything else.

So I feel a moral obligation to present it to them because they’re going to be better off. I’m actually serving them, I’m helping them. I’m providing value versus, hey, I’m soliciting money or I’m recruiting money or I’m begging for money. I don’t have that mindset at all, okay. So again, in this step, I just want to talk about these different parts, part number or step number one in this 5 step series, this is part number 5 in our 10 part series here, but it’s to craft an irresistible offer that you’re so convinced is good for them and good for you, that you feel like a moral obligation to present it to them. You feel so passionate for it that if somebody says no, you think that they’re actually hurting themselves by not investing with you? That is the philosophy. That’s how I feel. That’s, you know, that’s why I’ve been so successful because I know investors that invest with me are really better off than investing in the stock markets or investing in other deals. It’s really what it comes down to, right? So my question for you is what’s your irresistible offer? Go ahead and put some thought into that now, jot that down and then join me for part number 6. Step number 2, identify your ideal investor.

You’ve been listening to Josh Cantwell and the Accelerated Investor Podcast. Leave a comment on our iTunes channel and let us know what you want to learn next, or who you’d like Josh to interview. While you’re there, give us some five star rating and make sure to subscribe so you can be the first to hear new episodes. Follow Josh Cantwell and his companies, the Strategic Real Estate Coach and Freeland Ventures on all social media platforms now and stay up to date on new training and investment opportunities to start your journey toward the lifestyle you’ve always dreamed of. Apply for coaching at JoshCantwellCoaching.com.

As a real estate investor, there’s no doubt you know the importance of securing the right funding for your property deals. After all, as we’ve established already in this “Funding Equals Freedom” series, the ability to fund your investments is the #1 way to achieve your ultimate financial goals. 

To help you get started on your path to financial freedom, Josh Cantwell shares his #1 step (in a 5-step process) for raising private capital. 

This first step has two phases: creating an irresistible offer for potential private lenders AND letting them know when they’ll receive their principal back. 

Tune in to hear Josh’s insight on these topics. Plus, he shares the exact calculations he uses when paying his private investors. 

Whether you’re investing in single-family properties, $10 million apartment complexes, or anything in between, Josh’s advice and strategies will prove helpful for your real estate investing business. 

And be sure to check out “Part 6” of this podcast series for your #2 step in the process for raising private capital: finding the right investors.

What’s Inside:

  • How to craft an irresistible offer for potential investors 
  • Josh’s method for paying his investors
  • How Josh structures an irresistible offer specifically for his value-add apartment investors 
  • How approaching private lenders could be your moral obligation 

Mentioned in this episode​