Why Private Money is a Must in Today's Economy (Minisode)

Welcome ladies to The Real Estate Investor Show, providing inspiration, strategies, and insight to empower women investors to live balanced and financially free lives. Now here are your co-hosts, Liz and Andresa Guidelli. Welcome back ladies. This is Liz.

This is Andresa.

Welcome back to The Real Estate Investor Show. Where we're all about empowering women to live a financially free and balanced life and whatever that means to you, right, Andresa? Indeed. We appreciate you being back on another minisode where 10 minutes or less, depends on who's speaking. Usually I go over at least a minute, but 10 minutes or less.

Liar, you go 10 minutes over.

I could talk more, but we try to get to it really quickly because we know you don't have a lot of time and just want like a little bite-sized Something, and this is where Andresa and I kind of share different ideas, whether it's real estate investing, business strategies, or self-care. So I'm on this week, I'm gonna be talking about why private money is an absolute must in today's economy.

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Okay. So what are we talking about? I know I've talked a lot about private money over the course of our, you know, 4 years we've had this community. That's how my husband and I really scaled our business, right? Really working with private money equity partners, private lenders. And so I was thinking a lot about today's economy and how many women in our community, in our Facebook community, if you're not part of our Facebook community, where are you? Very supportive community. And what we do there is women share what's coming up for them, where their challenges are. And so, so many women right now are sharing that a lot of their, you know, the institutional lending, institutional lenders are obviously getting more conservative. They're getting more nervous, right? Things dry up when there's, you know, recession unfolding in front of us. There's no question. So ironically, this is when opportunities are going to increase. Absolutely. Especially in the last couple years, how hot multifamily is, how hot a lot of our, we've seen a lot of the different, you know, prices have just driven up, especially since COVID So I think opportunities are going to increase. Money's gonna get tighter, especially traditional, you know, financing is gonna get tighter. So the need for private money to broker and get in and get into these projects is going to increase significantly. And we've seen it already, right? Even in our Strive community, Andresa, women partnering on deals, which is a beautiful thing. And one of the things that women get from, so they can learn, you know, get to know each other. So I wanted to give some tips on, you know, I'm not gonna go through the current state of the market. We've been recording a number of episodes about that. We all kind of all know what's going on, interest rates increasing, banks are getting more conservative, and, and obviously, you know, costs are going up. So I wanted to share again, 3 thoughts, 3 strategies on private money to get into, get back into your consciousness, especially if you're an investor who's done a lot of her deals herself, right? She's used her own money. This is what private money is great for because you have a track record, you have a proof of concept. Now, if you're listening to this and you've never done a deal, and you wanna go after private money, it's possible. I'm not gonna ever say no, but you know, in times like we're in, the need for a track record and the need for kind of knowing the what-ifs is really important because costs are going up. There is a level of conservative underwriting that needs to happen. You need to be careful. There's no question you can grow significantly during these times, but you need to be careful as well. And that does come with experience. So if you are a newbie and you're listening to this and you wanna raise money, and have never done a deal, Godspeed, but go find someone who has, go find someone who has, you need someone on your team as an advisor somewhere along the way that you can bounce your projects off of. So that's for that camp. Now, if you're the woman listening to this, you've done deals yourself and you really wanna expand into private money more during this time, cuz you know, cuz quite honestly, the opportunities, I had a call yesterday, opportunities are coming to you, I'm sure. And it's only gonna increase. Happening everywhere. Private lending. So working with lenders on a private level is obviously one of your options, right? Again, what that is great for. So you, you have to know what each of the private money pools are, what it's great for, and when it could be used depending on the projects you have. That's what people in this business do. It's not like I only work with lenders, I only work with equity partners, I only do this. You could say that, but More importantly, you need to know what tool is used for which vehicle. And if you can get a sense of that and really become very good at that, you're gonna be able to raise money for different projects for different reasons. So lending, beginning, middle, and end, 6 to 12 months. It's from a timeframe perspective. That's where lenders could be very useful. Okay? There has to be an exit strategy so you can pay back your lender principal plus interest. It's very simple. We try to overcomplicate things for lenders. But that's the bottom line. They want their money back, you know, cuz the longer you have their money, the more money you're gonna have to owe them. We've had lenders on certain projects that went over, you know, not working with Andresa, cuz she drove timeline much, much quicker. But we had a project that went over on timeline, right? And we had a lot more interest to pay back that lender. They liked it, but we, it cut into whose profit? The borrower. So you have to really understand that lending is great for those projects to have a beginning, middle, and end. The exit could be a sale of a property, you know, obviously the, the refinance, but there has to be an exit so you could pull their money out and pay them their interest. You know, I, I've seen interest rates anywhere from 8 to 12% right now, plus sometimes some points and, and how you structure them. I'm not gonna get into, cuz we don't have that time, but typically promissory note and a deed of trust or a mortgage security document are the two things that you tend to need. Again, read my husband's book. I'm not gonna give a shameless plug, but read his book, Raising Private Capital, and you'll get more insight into that. But lending is a great, tool for people who do not wanna become a partner with you. They wanna lend it, they want it back, and they want their interest rate. And again, you can negotiate. Everything could be negotiable, how they're gonna pay you, the terms, everything is negotiable. But what we've structured working with lenders, it's really helpful to pay them at the end. It's helpful to pay them at the end so you're not cutting into your own project, your own cash flow. Just a tip. It doesn't mean it has to happen, but it's nice to be able to, to, to hold off on, on paying them back their, their principal and interest till the end. So that's what I got for you on lending. Equity is also another option you have as a private money option. We hear that all the time. People get very scared of equity. They feel like it's partnership. Oh, I don't wanna go there. And then they just go down the lending side. But there's certain projects right now, lending isn't gonna work. I was talking to someone yesterday that buys single-family homes. She bought single-family homes and then she's renting them out to third-party companies. And the third-party company is basically assisted living. So she has these really phenomenal relationships. They need the homes for these assisted living clients. They don't wanna go buy the home. She's buying the home and it's almost operating as a commercial lease, like a 10-year lease. It's not like a residential lease. So it's a really interesting concept. People are flooding her inbox on opportunity. She has like 15 of these and she's tapped out financially. Perfect person for a private money opportunity for her to figure this out. So she said, well, The exit is not 6 to 12 months. And she was just giving me some ways that she can structure this. And, and I said, then equity's more of a long-term play. So think of equity as a long-term play. It is partnership. You are going into business with someone, right? Meaning you're going into business in the sense of you're both on the, the hook. You win together, you lose together, I always say. So the bottom line with equity is that either partners are gonna be active or they're going to be passive. And that's the big question mark you need to ask yourself as you think about Susie who wants to work with you. She's got $100 grand. Okay. Is Susie gonna be a lender? Is she gonna be an active partner with me or is she going to be a passive partner? The structuring of all those things varies. Obviously, I will say so many times I see women partnering with friends. The partners are not doing anything except putting money into deals and they're not filing with the SEC, and that's technically a security. People can't just passively invest in your deals and you not, and it not be filed with the SEC. That's against the SEC rules technically. Again, I'm not an attorney, but what I know of raising money, that, that's a no-no. So you have to make sure people are active with you and that could look a lot of various things. So I don't wanna get into the weeds too much, but I want people to think about the 3 buckets as a, you're a strategic raiser of money, right? Private money is everywhere. And then the next question is, where do I find these people? but they either could be a lender, they could either be an active partner with you, or they could be a passive partner. And if they go down the passive side, that's more of like a syndication and you're pooling money together to go in and to buy a property. And that has a whole flood of things that you need to do to make sure you are, you know, adhering to guidelines and rules in the SEC. So what I will say though is in terms of finding money, it's really simple. Andresa Guidelli, finding partners, whether they're a lender—

let me pause. Like she said, she look at my dad in my eye right now. She's like, listen, listen to what I'm gonna say. So might be very, very important people. All right, go ahead, Liz.

So the easiest way to find people in your circle, because that's quite honestly where you're going to start. We have strangers. Strangers aren't going to give you $100 grand. Sorry to tell you, they're just not. It's not where it begins. Maybe when you grow your business, but not at the beginning. Not your first private money partner. It's going to be someone you have a preexisting relationship with, most likely. Start talking about what you're doing. With everyone. It's very simple. Now, how you do that can look very differently. I'm not saying oddly go into the supermarket, strike up a conversation with a stranger, and talk about your investing. That's random, right? That's not what I'm saying. What I am saying though is we talk to people every single day. Start sharing what you're up to in your life rather than it being this closeted thing that you're doing. I do that often where people don't even know what I'm doing with certain things, and I'm getting even better with sharing what I'm up to with people. I was at a cocktail party. You love this, Andresa. It was a woman. We, we were talking and I was sharing with this, and this woman was like, I didn't know you did. And I was just getting into this whole conversation. She joined our community. She's going to the local meetup, but I just start sharing what I'm up to. Right? So I give that advice and do it in a way that works for you. You're an introvert, you're an extrovert. I don't care what your personality is. Share what you do, share what you're up to in a way that works for you. That would intrigue the person enough to say, wow, that's really interesting. Tell me more about that. So that's what I have for you today. Number 1, start sharing what you're doing with everyone, friends, your family, and do it in a way that's intriguing. You know, rather than, oh, I invest in real estate. Mm, not interesting. Share specifically what you're up to. Actually, the market's really loosening up. There's so many opportunities. My challenge right now, is actually getting into these deals quicker. And, and I'm, I'm actually looking for private money partners. Say that to people, whether they're that person or they know people. Start talking about what you need. People can't read your mind. Second thing, be really curious and knowledgeable about lending, about active partners and passive partners. Start to know those 3 buckets. So when you do have an opportunity, you got a person on the hook, you know now where to put them in those 3 buckets. Obviously there's more creative financing options. I'm not sharing about, you know, owner financing, all those, Great, great strategies, but I'm just talking about more private money and how we built our own business and how we continue to build. So that's what I got for you this week.

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