If you are ever faced with a difficult question from a private investor, or even imagine having one, don’t worry. It’s something good.
The tough questions for private money investors might be:
“How do I know this will work?”
“What if you can’t sell the property?”
“What happens if the property burns?”
There are many other questions and possible objections that the investor might have in placing funds in their real estate investment agreement. I’ll save the ink for now.
So why is this good?
Sales 101 comes down to the basics to make a transaction easier. And, one of the basics of getting the investor to write the check is answering or withdrawing all possible reasons why they won’t invest money in your deal (s). If you try to get the money without having your fundamental questions and objections answered, your success rate will be below average (at best). Do not short-circuit the process.
The first step in doing this is getting ahead of objections by answering them in your marketing pieces and your presentation. The main points must be covered and if the investor continues to step forward, then it has indeed gone through a good rating mechanism. Once they’ve gone through the rating mechanism (visit your website, receive your email, fill out a questionnaire, call you once or twice), the fundamental questions have been answered, the prospect is interested and ready to move on.
If you don’t hear any questions or objections along the way, assume the potential customer isn’t interested. Something did not sit well with them.
Sometimes it can be challenging to sit in front of an investor or group of people who have the potential to put hundreds of thousands or millions of dollars into your business and face tough questions. But the same reasoning holds. If they are asking questions, it means that they are interested and have not rejected your proposal in their mind.
Think of it this way: The last time you bought a bigger ticket (maybe a TV or a car), did you ask a lot of questions? I bet you did. He wanted to have all his data correct before he parted with thousands of dollars. Can you imagine walking into a Best Buy and tapping your credit card on the counter and saying “give me one of those!”? Probably not. You asked questions about your pending purchase, and when you received satisfactory answers to those questions, you moved up one rung on the buyer ladder. The same goes for private money investors.
The more questions you receive, the more interested the potential customer will be. I assume, of course, that the investor has singled out himself as a “tire kicker.” Tire kickers will ask all kinds of questions without the intention (or the ability, probably) to deposit any amount of money with you. If you are marketing your opportunity properly, people should come quickly to you who are ready, willing and able to fund.
The more difficult the investor’s question, the more interested they will be. By asking contingency questions, such as “what happens if the house catches fire,” they are projecting the investment with you in the theater of your mind. Once the movie plays for them and results in a happy ending, even despite some perceived adversity, the money is sure to follow.
Learn to answer questions head-on. The less you beat around the bush, the less reason an investor will have to mistrust you. Trust is pillar one in your private money pipeline, so build carefully.