#038: Funding Equals Freedom Series – Part 6

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. If this is the first podcasts that you’ve listened to, you’ve missed a lot to go back and check out the other hundred and don’t know 60 70 episodes that we’ve released, especially this particular series that we’re in the middle of. We’re talking about private capital for real estate investing. I’ve successfully raised over $30 or $35 million of private money. We run a fund, we do private lender loans, we’ve invested in over 1,500 units of apartments.

I have over 200 private investors that invest with me and I also underwrite and originate loans and sell them to crowd funding platforms. And we have an entire business basically around recruiting, raising and managing other people’s private money in real estate. So we sort of know what we’re doing and I hope that I can in this podcast solo cast basically just conveyed to you some more ideas around raising and recruiting private money.

And we’re in the middle of our five step process for getting all the funding you need and all the capital you need for all the deals you want. And so we’re on step number two. Step number two is to identify your ideal investor. So when I think about recruiting capital, you know, I used to recruit and raise money from pretty much anybody, anybody and everybody, anybody that would listen to me, anybody that I could talk to, anybody that I could create a prior existing substantial relationship with and I would build my network and talk to people and network and I would get to know them. And then when I knew them and I had a relationship with them, I would present to them, right? I would present them an opportunity and we would take it from there. But today I really think I take it one step further, way more strategic about it.

And that is that I’ve identified my ideal investor, my ideal avatar. My question is, do you have an ideal investor? Let me give you some examples. So in my business, I really have three avatars, three people that I work with and you know, raise money from and you know, it’s splintered off and we’ve got some others. But there’s really three main avatars that we work with. One, our current active and passive real estate investors. People that already know it like it are passionate for real estate. They’re already investing in rentals or they have a self-directed IRA. They’re flipping houses. We’ve got lots of investors who are already active real estate investors. Now I’ve taken that avatar one step deeper. I want to work with advanced real estate investors typically between the ages of 50 and 75 years old. People that are accredited that have $1 million net worth excluding their personal residence and have at least five years of experience investing in real estate.

So I take my avatar really deep. So these are active and passive real estate investors ages 50 to 75 who are accredited, meaning they have at least a $1 million dollar net worth excluding their personal residence and have at least five years experience investing in whether actively or passively in real estate. That is one of the active avatars that we recruit money from. Those are the groups that we try to go meet. The people that we try to meet up with. The groups that we try to attend to meet more people like that. The second avatar is investors who are corporate lifers, again, ages 50 to 75 who have been in the corporate world saving money in their pension, saving money in their 401k. Maybe their wife is also, you know, a nurse or a teacher or a business owner, but they’re investing actively in their deferred compensation, their retirement accounts, okay.

Again, we prefer people who are accredited, people who have $1 million net worth or more, but they don’t necessarily have to have real estate experience. But these are people who are about to retire or currently retired, their age, they’re hitting retirement age somewhere at least 59 and a half years old. In their sixties or 70’s and they are saving for retirement and they’re thinking, okay I’ve been in the rat race for 30 or 40 years. I’ve been investing in the market. The stock market’s been going up and down, up and down, up and down, and lots of volatility for 30 or 40 years. Now I need to protect my principle, okay. And when I look at real estate, if you buy it at a wholesale price, if you buy real estate at a wholesale price and make value add improvements, whether it’s rehabs, apartments, you know, whatever you can buy at a wholesale price, the price is not going to go down any further.

If anything through value add improvements, the price is only going to go up. The value of that building is only going to go up. So I’m looking for people who are, again, 50 to 75 years old, corporate lifers, big retirement account accredited, and who are people who are looking for principal preservation and a good return. That’s my second avatar. My third avatar is ECOM, ECOM business owners, right? So when I look at everything that’s going on with Amazon, people that are selling physical products from their websites, selling physical products on Amazon.com they’re selling physical product. Could be dog food, it could be computer parts, it could be audio video equipment, it could be, you know, crafting supplies. You know, whatever they’re selling this stuff on the internet. They’re selling their stuff from their website. They’re selling their stuff from Shopify and Amazon and all these different stores, these digital stores that they have.

Well, in that way, I’ve met hundreds of men and women who own these types of businesses are selling things. They have an amazing profit margin, right? Usually about a 30% to 40% profit margin. So if they sell $1 million worth of goods from their website, their net income is usually around $200,000 to $300,000 to $400,000 a year. And so every year they’re living on some of that income. And then they’re making strategic investments. They’re living on some of that income and making strategic investments. And ultimately that business could be worth 5 to 10 times EBITDAR, 5 to 10 times with EBITDAR stands for earnings before interest depreciation. And so when they look at EBITDAR, they look at after their expenses, the company being worth 5 to10 times that if they’re making $300,000 in their business, that business could easily be worth $1,000,005 to $3 million in a windfall.

So if they ell that business in a windfall, now they’ve got, not only do they have net free cashflow, but they also have a potential windfall, okay. My friend Ryan Moran, who is the owner founder of Capitalism.com has been a friend of mine for over 10 years. He invests in our private equity fund. He doesn’t mind me saying this because he had a windfall. He had net free cashflow from his business. He had a windfall and then he invested with us and I’ve been to Ryan’s events, The Capitalism Conference. I’ve spoken there on different panels. I love it. It’s awesome. And I go there because I get to meet tons and tons of ecommerce business owners, okay. Tons of ecommerce business owners and so when I’m there, we do a booth. We do a sponsorship because that’s my target audience. That’s one of my ideal investors.

One of my avatars is ECOM. So I go to different ECOM conferences to meet people in the crowd, in the hallways when I’m up on stage to talk to them about their opportunity to invest their free cashflow and their windfall profits in our real estate deals, okay. So a little bit of homework for you is for you to identify when you’re looking at your real estate investing business, who are your ideal investors? Who’s your avatar? And to be way more strategic specifically about who you’re going to recruit and work with. And I’ll give you one final thought before I let you go. And then we’re going to jump in to the next episode of, you know, to identify where your avatar can be found. We’re going to talk about that next, but I’ll give you an example. My friend Jake is in the commercial insurance business.

He sells commercial property and casualty insurance. And for a long time when Jake was getting started in his business he was a generalist. He would sell insurance to anybody. And as Jake got longer and longer and longer and better and better in his insurance business, Jake also became more narrow and he started focusing on guys that owned residential assisted living, assisted living facilities, memory care, hospice and rehab facilities. And he started to honing in his insurance practice and the only selling insurance to them. And guess what happened? Jake’s income quadrupled. He’s now known as the insurance guy. If you’re looking for that type of elder care insurance to cover your facility. And Jake has done an amazing job and he knows that industry knows that niche, like the back of his hand, he can answer any question when it comes to insurance because he went super niche, super narrow.

And so that’s one of my arguments for creating an avatar and focusing on that avatar is that you can know how they feel, how they act, what investment decisions they make, what’s important to them when you know what your avatar is. And then you could say, yeah, you know this guy that owns this ECOM store, he invests with me and this guy over here that has an ECOM store, he invests with me and this person that has an ECOM store, they invest with me. Very, very powerful in being niched. All right, so I hope you enjoyed this episode about how to identify your ideal investor, your ideal avatar. I’ll be back in the next episode of how to identify where your ideal investor can be found.

 

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​

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