Posted by John Behle on October 27, 2002 at 12:05:43:
In Reply to: Mr. John Behle I need HELP!!! Or Anyone With Great Paper Knowledge posted by Mike Nguyen on October 27, 2002 at 06:08:08:
You may find much of what you are looking for later on in the course. I talk quite a bit about working with private investors and building credibility.
I too looked very young clear through my 20's and into my 30's. Sadly that is changing quickly.
You can't change much about your young impression. You need to focus elsewhere. Notes have their own credibility. They don't need to "invest" with you - they are investing in a note with a track record, collateral and a credible payor.
So, build the value of the note. If you are just borrowing against the note, they don't need much trust in you anyway. Set up payments in an escrow, so as the payor pays, it goes straight through to the investor.
With some investors at first, I actually sold the notes to them and then had an option to buy the note back or particpate in future profits that I generated through improving the notes. In that case, they had no need to look at my age or inexperience - they had the note to look at.
I don't advocate selling to private investors. Too much can go wrong. I prefer to borrow from them and would advocate you do the same. So build the "backup package" on the note so you have all you need when you do approach them.
Most find it helpful to broker a few notes first. Then you use that as part of your credibility. You show those notes, why they were safe, the kind of yields the investor received, etc. Even if you didn't have a note "in hand" to document and show to an investor, put a package together on a sample note. That could be a note that you know of that isn't for sale or one that you find that has sold in the past. So, for example, if you know that XYZ company buys notes, go down to the county recorder's office, find one they have bought and then begin gathering documents and putting together a package. You could do a title report, pull all the documents, establish the value and condition of the property, take pictures, etc. You can't necessarily pull credit on the payor, but I play that down anyway. I stress that it's the property that ultimately pays the note if the payor doesn't. The collateral is far more important than credit.
Then show the investor the "3 P's of Paper" that I talk about in the course. The People, The Paper, and The Property.
Even if you had years of experience, I would still approach a new investor this way. I show them how I or they can establish the safety of a note.
As I go through that, if there is any thought of "how would I do that?" or something similar, then that would indicate you need to do it a few times to gain confidence. Confidence can go a long way in making up for youth and inexperience. Lack of confidence will send them running unless they already know the potential safety of note investment.
Eventually, you want the investor to just look at a summary sheet and fund or I have had them even write me a blank check to be filled out when I do the due-diligence on a note. That all comes later. For now, you need to:
1 - Pre-screen the investor as to funds, knowledge, speed, who decision makers are, etc.
2 - Train them somewhat as to what makes a good note and how to read and interpret documents you might bring them like title reports, appraisals, credit reports, etc.
3 - Test them. I talk about this in the course. I may run a note past them that I already am pretty sure I have funded just to see their reaction.
In addition to being essential to successful investing, pre-qualifying the investor is also a bit of a "turn the tables" negotiation technique. In a negotiation situation (which meeting with the investor is) sometimes only one person can be taking the lead and putting the other on the "hot seat" at a time. There is a huge difference between someone coming in with the approach of "please Mr. Investor invest with (in) me" versus, "Mr. Investor, I have access to an excellent investment with both safety and a great rate of return. Let's see if you qualify"
Of course, it isn't quite in those words, but it does illustrate the two types of stances people take. When I talk with an investor, banker or whoever, it is very clear in their minds that it's just an opportunity being presented to them if they are reasonable, prepared and quick. They know I can and will go elsewhere. There is a very non-chalant attitude. Even if there was not another source, I would still give them the same non-chalant "I don't need you" type attitude.
I suppose it is a little like dating. "Over-eager" vs. "hard to get." People want what they can't have. They devalue what they do have or can get too easily. Once they have what they want, they don't want it anymore. Once they lose what they once had, then they want it again.
I'd go through the portions of the video course that cover how to work with and cultivate investors several times. There is a lot of strategy there that will be helpful.
In summary, stress the note and collateral - not yourself. Prepare a track record by brokering or documenting notes. Educate the investor somewhat. Teach them basics of why they can know the safety level of a note. Many investors like to go kick the bricks. They will want to drive by and look at the property, possibly even look at comparables you have provided.
Run a note by the investor to see if they act and how quickly. Broker to them if you need to as a last resource, but only if the investor is somewhat educated as to notes, does their own due-diligence and totally accepts responsiblity and releases you. But again, that is a last resource if you absolutely can't get someone to loan against a note.
- Re: Mr. John Behle I need HELP!!! Or Anyone With Great Paper Knowledge Mike Nguyen 02:12:05 10/28/2002 (0)