Capital is critical right now. Cash is king. Approaching private investors for capital is something that gives a lot of real estate investor's sweaty palms. This is mainly due to fear of failure or due to hesitation to step out of the comfort zone. Much like making your first offer or talking to your first prospective tenant, private money is something that can be learned – usually very quickly.
A common trend seen among real estate investors (of all levels of experience) is to wait for deals to come up before they approach investors. Though this is a conventional technique and is considered to be safer, it involves too much time and comes with a risk of leaving too many opportunities untouched. So, even if you have your hands on a good deal, it may take a long time before you find the right money for it to materialize. You may also miss out on some other profitable deals, and investors are bound to notice your lack of foresight and confidence.
A better way of raising private money for your real estate investment projects is to reverse the order. While I agree this option is a lot more aggressive, it's going to net you far better results. Be a little more confident, and get the money first, and then move on to getting the deals.
What you will quickly learn is that there is a large pool of private investors who are desperately seeking fresh air and more profitable deals. So, all that you need to do is to instill confidence in them about your business plan and projects, and they'll be glad to ditch their financial planner. Playing it cautious and waiting for all the lights on the street to be green before you hit the gas is a recipe for mediocrity.
Deals move fast in today's world. And, if it is the big projects you are aiming at, you will most definitely need to have an adequate financial backing behind you. If it is an asset manager or a commercial broker who is helping you locate real estate deals, there is in no way he / she will be willing to spend any time with you unless you have enough capital on hand close the deal.
The biggest benefit of this 'ready-aim-fire' approach is that you can grab best deals at any given time – your offers and LOI's go to the top of the stack. In today's bargain hungry investor market, every little advantage helps your bottom line.