Today’s question comes from Jim. Jim says,”Hey! How do you handle a question from an investor who says , if that deal is so good, why don’t you put your own money into it?”
First of all, you tell the investor that you are the sponsor of the deal; you are the person that puts in sweat equity in the deal, your reputation is on the line and you’re the asset manager. And that’s how you earn your keep in a particular deal. So yes! The deal is good, you wanna be a part of it and that’s why you are sponsoring the deal and typically you don’t put any money into the deal. That’s how you roll. Now some investors not gonna like that. And that’s ok. Because somewhere else someone so what? Next I still have investors today tell me hey if you don’t put any scheme in the game I’m not gonna do any deal with you. Here’s another trick I wanna show with you. As you know you can get acquisition fees from most of your family properties. Well, tell the investor you gonna put 5 or 10% of your own funds in, ok, typically the acquisition fee, if 5% acquisition fee of the purchase price is what’s more 10% of the raise which you’ll be able to put in. So you can not only put in 10% of the raise through the acquisition fee but you will still have money left over from that acquisition fee. So you’re technically in the deal with no money in your pocket. You got a burning question, put in the blog below we might just answer yours next week.